The amnesty can also be used to declare assets held anywhere else in the world on the same generous terms.
Launched in 2009, the Liechtenstein Disclosure Facility (LDF) offers immunity from prosecution, a reduced penalty regime, no naming and shaming, tax liabilities from April 1999 only, and the ability to contact HMRC on a no-names basis to discuss a potential application.
Unless they have received a code of practice 9 letter from HMRC, any UK resident can take part in the amnesty. This includes individuals, partnerships, companies and even trusts. It is also worth checking that the offshore account was not opened via a UK branch of certain banks as this will render it un-qualifying.
Although the LDF runs until 2015, there is every reason to take advantage of it right now. The risk of waiting is far too great and so are the penalties.
How it works
The LDF covers most taxes, consequently the disclosure must be full and complete. Worldwide income, gains, assets and profits must be included. The facility is extremely efficient where inherited funds are concerned, as under normal circumstances there is no time limit within which HMRC must recover Inheritance Tax.
Under the LDF, Inheritance Tax is only recoverable for periods on or after 6 April 1999. If the deceased passed away before this date then no Inheritance Tax will be payable. Income and Capital Gains Tax liabilities relating to a deceased person can, generally, only be recovered for the six years prior to the death and HMRC can’t normally impose a penalty on the estates executors.
So how much money is needed to establish a Liechtenstein connection? The answer is a meaningful sum with sufficient value and permanence to reflect the spirit of the agreement between Liechtenstein and the UK. Opening a Liechtenstein connection is a prerequisite to making the disclosure.
The Swiss deal
The recently announced deal with the Swiss authorities was keenly awaited and following its publication I conclude that the LDF will be the best route for the vast majority of clients with assets in Switzerland. The Swiss deal is not an amnesty, there is no immunity from prosecution, and the price for preserving anonymity is far too high.
There will be a one-off deduction of between 19% and 34% to settle past liabilities depending on how long the account has been running and from January 2013 a new withholding tax of 48% on investment income, 40% on dividend income and 27 % on gains will be levied. This will apply to accounts that were open between 31 Dec 2010 and 31 May 2013.
Anyone with a Swiss account will have to run the gauntlet for the period up to the beginning of the deal. Not a good idea, bearing in mind the number of account details that find their way to the authorities. It must be better to regularise everything and apply for the LDF.
Turning to actual charges, the tax, penalties and interest under LDF applications so far has been in the 5% to 15% of balances region. Compare this with the Swiss deal of between 19% and 34%.
Peter Carnell is a financial marketing consultant
