Tax
Moving offshore accounts to Liechtenstein |
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| Tax | |
| Written by Fiona Fernie, Partner, Forensic Services BDO LLP | |
| Monday, 30 November 2009 | |
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BDO advises on how to use Liechtenstein to settle offshore tax affairs.
Depositors who already held accounts in Liechtenstein on 1 August 2009 could participate in the disclosure process from 1 September 2009. From tomorrow, 1 December 2009, anyone who transfers funds to Liechtenstein from any other offshore location can also use the ‘Liechtenstein Disclosure Facility’ (LDF) to settle their UK tax affairs. Under the LDF there is a limitation of tax liabilities to periods from 6 April 1999 onwards, so investors coming forward now will only pay 10 years worth of taxes. This is a major advantage as HMRC can normally pursue liabilities going back 20 years. The LDF also offers a fixed penalty of only 10 per cent, compared to the maximum of 100 per cent that could otherwise apply. The main condition is that the offshore account was not opened through a bank’s UK branch or agency. Therefore providing an offshore account was opened directly with an offshore bank, funds can be moved to Liechtenstein to qualify for the special terms of the LDF. The LDF can also include other offshore assets besides bank accounts, such as trusts, partnerships, companies and life insurance bonds. Anyone with an offshore account which includes untaxed amounts should consider using the LDF to regularise their tax affairs. This is especially the case where a liability to tax would otherwise arise in the years prior to 5 April 1999. It is highly unlikely that HMRC will offer such favourable terms again, and as time goes on it becomes more and more likely that HMRC will discover previously undisclosed amounts from the mass of information exchange agreements it has signed this year. Information is also likely to flow from other countries within Europe and USA, as tackling tax evasion remains high on the agenda of the G20 summits. If HMRC investigates anyone before they make a voluntary disclosure, there will be no amnesty, much higher penalties will be charged and, in the worst cases, criminal proceedings may be taken. For many depositors the LDF will be “an offer too good to refuse”. However, moving funds or other assets to Liechtenstein needs careful consideration in advance. In addition, the LDF is a different process from other disclosure opportunities involving the most experienced Inspectors at HMRC so a disclosure must be correct. Great care and expert advice should therefore be taken before approaching HMRC.
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