The LDF will run from 1 September 2009 until 31 March 2015 and provides a unique opportunity for taxpayers to make a disclosure of tax irregularities connected with offshore bank accounts and structures on avorable terms.
There may also be an opportunity for those with undisclosed tax liabilities connected with overseas assets outside of Liechtenstein but who transfer their assets to Liechtenstein anytime up to 31 March 2015 and take advantage of the terms.
What are the unique benefits of the LDF?
- A guaranteed immunity from prosecution for some tax related offences.
- Ability to have initial "no names” discussions with HMRC, prior to making a disclosure.
- Tax liability limited to 10 years (back to 5 April 1999) as opposed to the normal 20 year rule.
- Normally there is no time limitation for the recovery of undisclosed Inheritance Tax liabilities. Under the LDF, Inheritance Tax will also be limited to 10 years, which is a significant concession in relation to inherited wealth.
- A limit for penalties to 10% of relevant unpaid taxes if all conditions are met.
Although the LDF is available until 31 March 2015 it is important to start taking action now.
There is a misconception that those with undisclosed liabilities can wait until 2015 and then disclose for the 10 years prior to that date. If the disclosure is delayed to 2015 the period that would have to be included in the disclosure is 6 April 1999 to 5 April 2015 - it is not a rolling ten year window.
Additionally, some of the key aspects of the LDF (the CRO and the guaranteed 10 percent penalty) are only available for the period 6 April 1999 to 5 April 2009. Thereafter, normal tax rules will apply including from 6 April 2010 an increase in the top rate of tax from 40 percent to 50 percent. Furthermore the current penalty regime in the UK is much more stringent, particularly in respect of undisclosed offshore assets with penalties potentially starting at 50 percent of the underpaid tax.
Those with undisclosed UK tax liabilities should consider making a LDF disclosure for all years up to and including 5 April 2009 now. It follows that the self assessment tax return for 2009/10, which is not due to be submitted until 31 January 2011, can be filed on a correct basis thereby avoiding penalties altogether.
