HMRC have announced changes to the terms of the Liechtenstein Disclosure Facility (LDF).  The LDF was introduced in 2009 to encourage people with unpaid tax linked to investments or assets in Liechtenstein to settle their tax liability. 

The LDF offers favourable terms, including:

  • immunity from prosecution;
  • fixed 10% penalty on unpaid tax (up to 5 April  2009);
  • assessment period limited to accounting periods/tax years commencing on or after 1 April 1999;
  • single point of contact at HMRC; and
  • the option to use a single composite rate to cover all taxes.

Many people have chosen to open an account in Liechtenstein in order to make use of the favourable terms of the LDF. 

New guidance issued by HMRC indicates that some of the favourable terms of the LDF will not be available in certain circumstances.  Specifically, the fixed 10% penalty, the limited assessment period and the single composite rate will not be available in the following instances:

  1. Where a person enters the LDF to settle liabilities of which HMRC is already aware.  This impacts marketed avoidance schemes which have been disclosed under the Disclosure of Tax Avoidance Schemes (DOTAS).
  2. Where the issue being disclosed has already been subject to an intervention that began more than three months before the date of application.  This will cover, for example, any issue that is the subject of litigation and any civil enquiry that is supported by statutory information or investigation powers and is carried out for the purpose of ascertaining that the UK tax liabilities of the relevant person are correct. 
  3. Where there is no substantial connection between the liabilities being disclosed and the offshore asset held by the relevant person on 1 September 2009. This applies where less than 20% of the liabilities being disclosed are connected to the offshore assets.