The Liechtenstein Disclosure Facility (LDF) has been running for a number of years and appears to have been a successful initiative to encourage taxpayers to come forward over unpaid taxes.
The LDF gave a number of beneficial terms such as:
- A 10% fixed penalty on qualifying underpayments (for periods to 5 April 2009).
- Reduced reporting window to accounting periods/tax years commencing on or after 1 April 1999 only (rather than the usual 20 years)
- The option to choose whether to use a single composite rate of 40% rather than calculate actual liability on an annual basis
- Protection against criminal prosecution
- A single point of contact for disclosures
HMRC have recently announced a tightening of the rules, which is designed to prevent abuse of the scheme from users of Employee Benefit Trusts with liabilities linked to existing enquiries. The new rules could potentially catch other taxpayers however.
In situations where the following apply, the terms of the LDF will be restricted so that the 10% penalty, reduced reporting window and option to use the composite rate will be unavailable:
- where no new information has been offered;
- the issue is already subject to an intervention that began more than three months before the LDF application; and
- there is no substantial connection between the liabilities being disclosed and the offshore asset held by the taxpayer on 1 September 2009.
We believe that despite these changes the LDF scheme will remain attractive to most taxpayers and is therefore worth considering where taxes have been underpaid. Eaves and Co have successfully completed a number of disclosures under the LDF and would be happy to help anyone who might be affected.