Liechtenstein Disclosure Facility (LDF)
The LDF was first made available in 2009 and remains one of the most effective methods for UK residents to resolve historic tax issues with HM Revenue and Customs (“HMRC”).
The LDF is a bespoke service that allows UK resident individuals with unpaid tax on overseas investments or assets to settle their tax liability with HMRC. We have seen a marked increase in the number of clients who are looking to benefit under the terms of the LDF.
The unique advantages of the LDF are:
- Limited look back to 6 April 1999 (including inheritance tax);
- Limited 10% penalty for periods from 6 April 1999 up to 5 April 2009;
- It is available until 31 March 2015;
- The ability to have a no-names discussion with HMRC;
- Immunity from prosecution for tax related offences;
- The Composite Rate Option ("CRO") covering all taxes which can result in significant tax savings
Who can benefit from the LDF?
The LDF can be used by UK residents to disclose undeclared assets held anywhere in the world until 31 March 2015. The LDF is not limited to individuals as it can also apply to Trustees and companies.
Why should clients with undeclared assets act now?
Over the past few years HMRC have been gathering information on UK residents with undeclared assets from a variety of sources including double tax treaties, exchange of information agreements, courts orders, the EU Savings Directive and buying data obtained from overseas banks. HMRC have now started processing this information and they are writing to people who they believe have undeclared assets and in some cases they have opened serious fraud investigations (Code of Practice 9). Where an individual is contacted by HMRC they will not be able to benefit from the favourable terms of the LDF and will risk criminal prosecution and large penalties.
The Swiss and the UK authorities signed a joint declaration on 23 October 2010 and entered into exploratory talks on how to tax UK residents with Swiss bank accounts. However, we do not expect this or any future disclosure facility to be more favourable than the LDF. Therefore if UK taxpayers have undeclared assets they should take this opportunity to regularise their affairs as soon as possible and before they are contacted by HMRC.
SMP Accounting & Tax can assist with any questions concerning the LDF, explain the next steps a taxpayer should take and, where necessary, prepare and submit the LDF proposal. If taxpayers have undeclared assets and do not act now then they risk criminal prosecution and substantial penalties.