A second joint declaration has been signed by the UK and Liechtenstein following the Memorandum of Understanding in August 2009, which created the Liechtenstein Disclosure Facility (LDF).
There is nothing particularly earth shattering in this second joint declaration; it contains some clarification of various issues which have previously arisen − for example, when the property is moved into Liechtenstein to facilitate participation in the LDF, entity classification and circumstances where an individual will be excluded from the LDF.
It has previously been acknowledged that when an individual has property outside Liechtenstein, it could be moved into Liechtenstein and thereby come within the definition of “relevant property” for the purposes of the LDF so that the individual can take advantage of the facility. The new statement makes it clear that any new relevant property (in Liechtenstein) established specifically to facilitate participation in the LDF must be “meaningful and of sufficient value and permanence to reflect the spirit of the memorandum of understanding”. This is a really troublesome development because the meaning of these words is so subjective that they could mean anything, which seems wholly contrary to the purpose and clarity of the LDF. Fortunately, a further public statement is going to be made, and it is hoped this will clarify the position − but anybody waiting for this further clarification is at risk because if a Code 9 investigation is commenced into their affairs in the meantime, that will disqualify them from the LDF.
One rather alarming point is that HMRC say that will not “normally” seek to collect unpaid UK tax from the personal assets of the Financial Intermediaries, providing they comply fully with their obligations and actively assist UK taxpayers in meeting their obligations. They go on to say that it is unlikely to be in the public interest for HMRC to undertake a criminal investigation against the Financial Intermediaries. Quite apart from being a bit over the top (and hardly conducive to cooperation), it is difficult to see how it can work if the Financial Intermediary is not actually in Liechtenstein.
Nevertheless, the LDF remains a really valuable opportunity which nobody who has been in default with their tax obligations should ignore.