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FAQs for Existing Liechtenstein Account-Asset Holders
The terms that are available under the Liechtenstein Disclosure Facility (LDF) differ for those who already held funds/assets in Liechtenstein when the LDF was launched and those who didn't (but who now want to make a disclosure to HM Revenue & Customs (HMRC) via the LDF).
This FAQ deals with Existing Liechtenstein Account/Asset Holders. We have prepared separate FAQs for Offshore Account/Asset Holders held outside Liechtenstein.
On this page:
What is the LDF?
In August 2009, HMRC launched the LDF along with a new Tax Information Exchange Agreement (TIEA) with Liechtenstein. The UK and Liechtenstein governments signed a Memorandum of Understanding (MOU) aimed at preventing the evasion of UK tax (via Liechtenstein). In essence, the MOU contained a two-pronged approach: -
1. HMRC would offer a bespoke disclosure facility to allow UK taxpayers to regularise their affairs; and
2. Liechtenstein banks and fiduciary companies would commence a taxpayer compliance programme requiring that UK clients confirm that their UK tax affairs are in order. If not, then the clients would be asked to make a disclosure to HMRC. If a client does not confirm that they have fully complied with their UK tax requirements by 31 March 2015 then the Liechtenstein banks and/or fiduciary companies will end the relationship (i.e. close the account, structure etc).
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What are the benefits of using the LDF?
The terms offered by the LDF are more beneficial than would normally be secured or negotiated with HMRC as part of any tax disclosure. Real 'tax savings' can be made.
The benefits include: -
1. A guaranteed immunity from prosecution for the tax offences you might have committed (if a full disclosure is made);
2. Only taxes/duties due from 6 April 1999 onwards will be assessable (i.e. any taxes or duties that might be owed for periods before then do not have to be paid); and
3. A fixed penalty of 10% (on all unpaid taxes/duties from 6 April 1999 onwards).
The LDF covers all UK taxes and an election can be made to use the Composite Rate Option (40%) rather than different liabilities all being charged on the same monies (e.g. VAT, Corporation Tax, Income Tax, National Insurance Contributions etc).
If it can be established (and agreed with HMRC) that the taxpayer made an 'innocent error' any tax settlement will be restricted to only six years and no penalty will be charged. However, this is not easy to achieve and specialist advice from OneE TDI is essential.
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Can I take advantage of the LDF?
Any UK resident taxpayer (individuals, partnerships, companies and trusts) who has undisclosed tax liabilities linked to a Liechtenstein bank account, financial portfolio or structure (e.g. a trust ("Treuhandschaften"), a foundation ("Stiftung") or an establishment ("Anstalt")) can register for the LDF unless: -
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Are there any circumstances where I cannot benefit from all the terms offered by the LDF?
Yes. You may not be able to take advantage of all the beneficial terms full offered by the LDF if: -
Specialist advice from OneE TDI will help you confirm what terms you can secure as part of any LDF disclosure.
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Could I be prosecuted?
If you make a full and complete disclosure to HMRC under the LDF you will not be prosecuted for any tax-related offence that you might have committed.
However, if the funds/assets you hold in Liechtenstein are connected to criminal activity (other than tax evasion) then there is no guaranteed immunity from prosecution under the LDF. In such circumstances, OneE TDI will help you seek advice from leading lawyers to confirm your position and decide how best to proceed.
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How long do I have to register for the LDF?
The LDF and compliance programme run until 31 March 2015. However, if HMRC starts an investigation into your affairs before you've registered for the LDF (see above) then you might not then benefit from all the terms offered by the LDF – and you could end up paying significantly more to HMRC as part of any settlement.
The LDF allows taxpayers the opportunity to regularise and restructure their tax affairs in a tax efficient manner.
For these reasons, taxpayers are advised to register for the LDF 'sooner rather than later'.
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Does the LDF cover all taxes?
Yes. The LDF essentially covers all UK taxes (including UK Inheritance Tax, Income Tax, National Insurance Contributions, Corporation Tax, Capital Gains Tax, VAT and Stamp Duty. Tax withheld under the European Union Savings directive or under the Agreement on the Taxation of Savings between the EU and Liechtenstein may be offset.
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What has to be included in a LDF disclosure?
Most importantly, your LDF disclosure must be full and complete.
In general, the disclosure will include details of your world-wide income, profits, gains, assets and liabilities (including those not held in Liechtenstein). If you are non-UK domiciled for UK tax purposes you will only need to declare income, profits, gains, assets and liabilities relating to your UK tax liability.
You do not need to provide (and HMRC should not request) information on any assets or interests that are not relevant to UK tax liabilities.
Each case is different and advice from OneE TDI is essential before any disclosure is made to HMRC, but LDF disclosures generally require: -
- Various personal details;
- Information and documentation confirming that you have a Liechtenstein asset;
- Full details of all previously undisclosed tax liabilities for each tax year since 6 April 1999 (or earlier if applicable) and ending with the UK tax year covered by the disclosure. If you do not know actual amounts, estimates can be used, but evidence to support the estimates is required;
- Information confirming how the overall tax liability has been established (i.e. what it relates to, the periods involved etc). A disclosure report prepared by OneE TDI is often the best way to present this information to HMRC;
- A signed declaration that your disclosure is correct and complete; and
- An offer to pay an amount to cover the tax, interest and penalties due as part of the LDF and payment of the total liability. If you can't pay the full amount due, HMRC will require evidence to explain/confirm why and proposals for how and when you intend to make payment.
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What if the funds in Liechtenstein were inherited?
Please remember that there is normally no time limit within which HMRC must recover Inheritance Tax (IHT). However, under the LDF, IHT is only recoverable for periods on/after 6 April 1999. If the deceased passed away before then no IHT will be payable.
Furthermore, any Income Tax and Capital Gains Tax liabilities relating to a deceased person can, generally, only be recovered for the six years prior to the date of death and HMRC cannot normally impose a penalty on the Executors of the Estate.
If an election is made to use the LDF's Composite Rate Option, any IHT liability that might otherwise be due could fall away – a possible further tax saving. Specialist advice from OneE TDI on this point is essential.
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What could happen in Liechtenstein if I decide not to make a disclosure?
As part of the taxpayer compliance programme agreed as part of the MOU, all Liechtenstein Financial Intermediaries (FIs) are obliged to identify clients who they consider to be UK-resident and seek confirmation from those clients that they are either: -
(a) not liable to UK tax; or
(b) have fully complied with their UK tax obligations; or
(c) that they are making a disclosure to HMRC.
If customers don't provide the necessary confirmation within 18 months of being contacted by their FI then the FI will stop providing banking and/or fiduciary services to them or continue but with withholding tax or other sanctions applied.
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What if I take my chances and HMRC then catches up with me?
Obviously, the worst thing that could happen is that you could be criminally investigated and prosecuted for tax evasion.
If you should have made a disclosure and chose not to and HMRC starts a civil investigation into your affairs, it will be extensive and intrusive. You will also face a much higher penalty (up to a maximum of 100% of the tax evaded). Finally, HMRC could potentially 'Name and Shame' you – by publishing your name, address etc on its website in a list of deliberate defaulters. Going forward, HMRC could closely monitor your affairs for a number of years to ensure your ongoing tax compliance as part of its 'Managing Deliberate Defaulters' programme.
The best thing that a taxpayer can do to resolve any outstanding tax issues is to make a voluntary disclosure to HMRC. Specialist advice from OneE TDI is essential in this regard.
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How can OneE TDI help?
The LDF offers taxpayers a real opportunity to bring their UK tax affairs up-to-date without fear of prosecution. Tax (plus a related reduction in interest charges and possible penalties) can also be saved. OneE TDI is currently representing a number of clients who are going through the LDF process. We have successfully settled a number of cases where the clients involved have paid considerably less to HMRC than would potentially have been due. If required, we can also help clients to establish the 'relevant property' they require in Liechtenstein so as to allow them to apply to register for the LDF.
At the core of OneE TDI is a highly experienced team specialising in the management of all tax disclosures. We offer confidential, non-judgemental and invaluable advice and have a proven track record in successfully concluding matters with HMRC on behalf of our clients.
Please see the Testimonials kindly provided by our clients (or their accountants or lawyers), which confirm our levels of client service and expertise in this area.
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How can I contact OneE TDI?
If you would like a free, confidential, no obligation discussion with us please contact either Gary Rowson or Mark Taylor on 0800 652 6156 or complete and submit the online form below.
Whilst we endeavour to provide informative and accurate information, the content on this site is for general information purposes only and should not be taken to constitute tax or legal advice which must always be tailored to individual circumstances. Please contact us if you would like to discuss matters.
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Liechtenstein Disclosure Facility (LDF)