5,000 British investors with an estimated £2-3bn in secretive Liechtenstein bank accounts are being offered special terms if they make voluntary disclosures under a ground-breaking tax amnesty deal signed today.
Anyone with an offshore bank account in Liechtenstein will be able to come clean using the Liechtenstein Disclosure Facility (LDF) on even better terms than on offer under the New Disclosure Opportunity. The penalty level will be the same (10%) but HMRC will only go back 10 years, rather than the statutory maximum of 20. There is an assurance that investors who come forward would not be criminally prosecuted for tax evasion.
British tax residents will have 5 years from 1 September 2010 to declare any assets they hold via the principality. Those who don’t make a full disclosure by March 31 2015 will have their accounts closed. Banks and trust companies will have to prove this by being subject to independent checking. Investors could simply move their money without informing HMRC – but would be vulnerable to being reported under the anti-money laundering rules.
Liechtenstein will not be handing over bank details etc to the UK as part of this deal. But a new Tax Information Exchange Agreement (TIEA) has also been signed that will enable the UK and Liechtenstein to exchange information to ensure the right tax is paid in each country in future.
Liechtenstein, formerly one of the most secretive jurisdictions, came under immense international pressure after German tax authorities bought stolen customer data from a former employee of a Liechtenstein bank and used it to uncover a significant number of serious tax evasion cases. Attention is now turning to Switzerland which is trying to settle a high profile tax dispute between UBS and the US government, which wants the identities and account details of 52,000 of the bank’s clients.
Dave Hartnett, HMRC’s permanent secretary for tax, said: “Those who have been evading UK tax on assets held in Liechtenstein banks must now settle with us. There are no alternatives.” He warned that those who ignored the disclosure oportunity could face penalties of up to 100pc or even prosecution, when HMRC caught up with them.
Lynam Tax enquiry experts are sceptical that HMRC will limit all aspects of its tax enquiries into anyone who comes forward (under the LDF) to 10 years (although they may pursue tax on income and gains arising in Liechtenstein for 10 years only, on practical grounds). The law says they can assess up to 20 years. HMRC have recently been admonished by the European courts for overstepping their discretionary powers and they do not have the legal right not to go back 20 years. If HMRC do limit all worldwide historic tax liabilities to 10 years that will be an unprecedented move and and one which puts Liechtenstein investors in a far better position than anyone investing elsewhere (especially people who did not have any offshore bank accounts!). Part of HMRC’s logic may be that monies held in various structures (e.g. anstalt, trust enterprise, trust reg., treuunternehmen, establishment, trusts, treuhandschaften, foundation, stiftungen) would not trigger a tax charge in earlier years in any event unless the monies had been repatriated to the UK at some point. Investors will want to take care that they do not panic and create a tax liability where one does not currently exist by remitting monies without taking advice.
Attention is now turning to Switzerland which is trying to settle a high profile tax dispute between UBS and the US government, which wants the identities of 52,000 of the bank’s clients, before a pre-trial meeting tomorrow.
What does this mean for me?
If you have any undeclared tax liabilities and also an offshore bank account or offshore assets (including in Liechtenstein) or any offshore property then you can use the Liechtenstein Disclosure Facility, NDO or the pre-existing voluntary disclosure routes. If you have very straightforward tax affairs you may be able to handle the disclosure yourself or with the help of your usual general practitioner accountant. If your tax affairs are more complicated (e.g. you have several sources of income, or your offshore accounts are more than 6 years old, or you are a UK trader who has undeclared trading income, or your domicile or residence status is unclear, or you are an executor of an estate that did not declare the offshore asset/ bank account for IHT purposes, you are currently subject to a tax enquiry or investigation, or you have assets held via Liechtenstein) then you may need specialist help.
If you are concerned about an offshore bank account or offshore assets, or have any historic tax liabilities that are worrying you, or think the Liechtenstein Disclosure Facility or the New Disclosure Opportunity may benefit you: then Lynam Tax Enquiry Experts can help. Call today for a confidential, discreet discussion with our experienced Tax Dispute Specialists.
Call Paul Lynam now on 0845 643 9997