UK: LDF – Prendere O Lasciare: La Liechtenstein Disclosure Facility

The Liechtenstein Disclosure Facility (LDF) was introduced in September 2009 to allow UK taxpayers to make the disclosure of offshore assets not subject to taxation. However, in the budget of March 2015, it was announced that the LDF facility and the disclosure to the Crown dependencies start to a close early than planned, and that consequently we must prepare for major changes.

Below we will explain the benefits of the LDF and provide details of the measures to be taken to make a disclosure, we will help set out what will happen as of December 31, 2015, when the LDF will no longer be usable.

Advantages of the LDF

• Immunity from any criminal proceedings
• Single point of contact for disclosures
• 10% of fixed penalty for the liabilities paid in defect for most of the period of disclosure (however, must be paid interest in full)
• If an error is not culpable is not imposed any sanction
• Assessment period limited only to taxation years / accounting period from 1 to aprile1999 including
• Option of applying a so-called composite rate of 40% or calculate the effective tax rate on an annual basis.

Steps required to make a disclosure through the LDF

• Confirm not to be subjected to investigations by the United Kingdom tax authorities (HMRC), or not making a disclosure in the past even apart from an ongoing investigation
• Dispose of assets such investment / holding detainees in Liechtenstein (including bank accounts) and have established relationships with financial intermediaries in the Principality
• Make notification disclosures (disclosure) of all the omissions in the UK and offshore for tax years from 6 April 1999 onwards
• Calculate tax liabilities, interest and penalties due and bid at ‘HMRC for
  that sum

You should be able to receive a notification of registration of the LDF and you have seven months to complete the process of disclosure.

The future

Following the disappearance of the LDF, it will be kicked off with a new disclosure procedure, temporarily, until mid-2017, before the introduction of common reporting standards. The details of this new disclosure procedure, described by the government as ‘one last chance’, have not yet been published, and perhaps we will know more in the second budget year (July 8). However, we were informed that we should expect more stringent terms than the existing ones, for inclusion of:

• penalties at least 30%, as well as taxes and interest due; is
• no guaranteed immunity for criminal proceedings.

Of course individuals, executors, beneficiaries, partnerships, companies and trustees would do well to take advantage of more favorable terms offered by the LDF, before it becomes unavailable. Where measures to be taken to start the disclosure should be estimated at more than a couple of weeks, it would be good to act in advance of the end of December, in order to complete in time all the necessary measures.