Do you have a tax liability in relation to an offshore bank account, trust, company or other offshore structure?

If so, you may be able to take advantage of HMRC’s Liechtenstein Disclosure Facility (LDF) and cap the tax liabilities at the period 6 April 1999 onwards. This may apply even if you have registered an intention to make a disclosure under the NDO or if there is currently an HMRC investigation underway, so long as the investigation is not under Code of Practice 9 or a criminal investigation.

The LDF can be used regardless of where the offshore accounts or assets are currently situated.  The LDF provides for a 10% fixed tax geared penalty as with the NDO but, crucially, seeks to assess liabilities for only the last 10 years, as opposed to the 20 year period considered in the NDO.  It also includes the option of a composite rate of tax of 40% per annum which can save tax where multiple taxes are involved.

This means that a taxpayer could, if they arranged their affairs correctly, cap their tax liabilities to a 10 year period even though historic income, gains or IHT charges arose in relation to assets which were at the time not in Liechtenstein.  This could save tax, interest and penalties of over 50% compared to either an NDO disclosure or any subsequent HMRC investigation. 

Even for taxpayers with offshore liabilities arising wholly within the last 10 years, this mechanism could still prove attractive given that the NDO deadline has passed, and the LDF offers a low fixed penalty, will prevent a costly, time consuming and intrusive HMRC investigation, and provides immunity from prosecution.

Although taxpayers may currently or historically have had no investments or interests in Liechtenstein, they may still qualify for the LDF by taking some straightforward steps now.  

The LDF presents an opportunity for taxpayers with undisclosed UK tax liabilities linked to offshore bank accounts or structures anywhere in the world to settle those liabilities on advantageous terms and is open for business until March 2015.

Read our FAQs below to find out if you could benefit from the LDF.

1. I have already registered for the NDO so won’t I have to pay tax for up to 20 years?
   • Not necessarily. You may be able to benefit from the LDF if you:
   • Were not contacted by HMRC about the current NDO or previous Offshore Disclosure Facility (ODF)
   • Are not currently under investigation under Code of Practice 9 (suspected serious tax fraud)
   • Didn’t open an overseas bank account through a UK branch
   • If you meet these conditions you can transfer to the LDF and benefit from its enhanced terms.
2. I missed the NDO deadline so can I use the LDF?
   • Yes, subject to meeting the conditions set out at question 1 and making arrangements to transfer relevant assets to Liechtenstein.
3. My only tax liabilities are for the period 6 April 1999 onwards, is there any advantage to using the LDF?
   • If you are not registered under NDO, then you will almost certainly benefit from the LDF due to the low fixed penalty of 10%. Depending on the tax liabilities, you may also be able to benefit from the 40% composite tax rate available under the LDF.
4. I am being investigated by HMRC under Code of Practice 8 in relation to an asset offshore and HMRC wants a penalty of over 10% of the tax due – can I benefit from the LDF even at this very late stage of the investigation?
   • Yes, subject to fulfilling the qualification criteria you may be able to secure a lower penalty simply by making a disclosure under the LDF.
5. How will I know if it’s worthwhile moving assets to Liechtenstein just to benefit from the LDF?
   • We can help explain what is involved and what the advantages would be and whether it would be in your interests to use the LDF.

There are of course many more questions to consider but we hope the basic points above will help as a starting point in recognising whether the LDF may be of help to you.

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