Last updated 27 January 2012:
FAQs added 7.20, 7.21, 7.22, 7.23, 7.24 and 7.25
FAQ’s amended 3.1, 3.4 and 5.18
Answers to commonly asked questions about the Liechtenstein Disclosure Facility (LDF). The answers given below are not a substitute for the Memorandum of Understanding (MOU) between the government of Liechtenstein and HM Revenue & Customs (HMRC). The MOU sets out the full terms of the agreement.
HM Revenue & Customs (HMRC) will update and/or add to these FAQs if it becomes apparent that further explanation or information would be helpful.
Go to the Memorandum of Understanding (PDF 109K)
Please select from the FAQs set out below:
1.1 What is the Liechtenstein Disclosure Facility (LDF)?
1.2 What is special about the LDF?
1.3 What is the advantage of a single point of contact?
1.5 Could I be criminally investigated by HMRC if I take part in the LDF?
1.7 What are my obligations under the facility?
1.9 What are the time limits for LDF?
1.10 How can the LDF that is established pursuant to the MOU be clarified, varied or terminated?
1.12 What use will HMRC make of the information given by the report?
1.19 Can I self certify to my financial intermediary that I have no liability to UK tax?
1.22 In what circumstances will action by HMRC prevent my registration and participation in the LDF?
1.23 What does 'formally notified' mean in FAQ 1.22? (see above)
1.27. What connection to Liechtenstein do I need in order to qualify for the LDF?
2.2 What do I have to do if a FI tells me I may be liable to UK tax?
2.4 Will HMRC provide information about me to the FI?
2.5 Why do I need to send the certificates to the FI?
2.6 What happens if I do not comply with the FI's notice?
3.1 How do I register for the LDF?
3.2 How many registrations has HMRC received under the LDF to date?
3.4 What is a Confirmation of Relevance?
3.5 What purpose will HMRC make of the Confirmation of Relevance?
3.6 If I register before 1 December 2011 will HMRC require a Confirmation of Relevance?
4.1 What do I have to include in my disclosure?
4.2 Do I need to disclose all of my assets or interests under the LDF?
4.3 I hold joint assets with my partner/spouse. Can I make a joint disclosure?
4.4 In relation to completing a disclosure what additional documents does HMRC require?
4.5 How far back does an LDF participant need to pay any unpaid UK liabilities?
4.7 What if I cannot complete my disclosure within the time limits?
4.8 Does the Disclosure Certificate mean that my disclosure is agreed?
4.10 Am I required to submit a disclosure report or narrative with my LDF disclosure?
4.11 Will my disclosure be subject to a formal investigation?
4.13 What is HMRC's approach where there is suspicion of a false or incomplete LDF disclosure?
5.1 What do you mean by 'an asset or an interest in an asset in Liechtenstein'?
5.4 How is interest calculated?
5.11 Will you be seeking information relating to non UK beneficiaries of a trust?
5.13 How is interest calculated on liabilities disclosed under the LDF?
5.20 What is HMRC's approach to issuing protective assessments in LDF cases?
7.1 What is the Composite Rate Option (CRO)?
7.2 For what period does the CRO apply?
7.3 How is the CRO calculated?
7.4 Will the CRO be extended beyond 5 April 2009?
7.5 How does the composite rate of tax work?
7.6 Can I elect to have actual and composite rate tax for different years?
7.16 I have elected for the CRO. What is the due and payable date for interest purposes?
7.17 I have elected to use the CRO. Can I choose which omitted income or gains I apply this to?
How is the tax under the CRO calculated?
The Government of Liechtenstein has committed to introduce a five year taxpayer assistance and compliance programme under which financial intermediaries in Liechtenstein will need to be satisfied that, where appropriate, clients are declaring Liechtenstein investments to HMRC.
If you are a UK taxpayer - or if your Liechtenstein Financial Intermediary (FI) thinks you may be - they will be in touch with you about this.
HMRC has launched the LDF to help UK taxpayers make a disclosure where appropriate.
However, there is no need to wait for your FI to get in touch. You can contact HMRC as explained at What are my obligations under the facility? to make a disclosure under the LDF from 1 September 2009 but you will need to tell the FI that you have done this. You may wish to consult your financial advisor about this.
The facility has been introduced to help UK taxpayers with undeclared investments in Liechtenstein to come forward and get their past and future tax affairs on the right footing. By coming forward under LDF, they will be able to take advantage of a number of special terms:
This provides a specific service which HMRC has introduced to support people taking part in LDF. It recognises that people with investments in Liechtenstein often have specific needs due to the complexity of their financial affairs. Contact the helpdesk for further details (see What are my obligations under the facility?).
Yes. An adviser can contact the Liechtenstein Helpdesk for advice on matters connected with an LDF disclosure. However, registration and disclosure must name the relevant person covered by the disclosure.
HMRC will not start a criminal investigation for a tax-related offence if you make a full and accurate disclosure to us and the source of the funds is not from 'criminal activity'. Criminal activity, in this respect, does not include tax evasion.
There may be occasions when HMRC will take a different view to that contended in a disclosure but if a full disclosure is made and accurate information presented you will not be subject to criminal investigation.
You should contact the HMRC Liechtenstein helpdesk to notify your intention to make a disclosure as outlined in How do I register for the LDF? as soon as you are contacted by your FI. (What do I do if I have investments in Liechtenstein but do not receive a notice or do not know who my FI is? explains what to do if you have investments in Liechtenstein but have not been contacted or you do not know who your FI is.) You can register by writing or telephoning HMRC using these contact details.)
HMRC advise you to register for the LDF as soon as you think that you have a UK tax liability to declare because interest will accrue on any tax payable and leaving your notification until after you are contacted by your FI may delay matters and lead to an increased interest charge.
HM Revenue & Customs
Liechtenstein Desk
7th Floor, The Triad
Stanley Road
Bootle
Merseyside
L75 2EE
Tel: 0845 600 4680
Tel: 0044 151 300 2750 (for calls from outside the UK)
Lines are open 8.30 am to 5.00 pm (UK local time), Monday to Friday
If you are eligible HMRC will send you a registration certificate within 60 days of receiving your notification. You need to send the certificate (or a notarised copy of it) to your FI. You must do this within 30 days of receiving the certificate. If HMRC do not accept you into the disclosure facility they will write to you explaining why and tell you what you should do next.
You should make your disclosure by sending the information described at What do I have to include in my disclosure? within:
HMRC will send you a disclosure certificate within 30 days of receiving your disclosure providing it is complete. You need to send the certificate (or a notarised copy of it) to your FI. You must do this within 30 days of receiving the certificate. If HMRC have agreed to give you additional time to complete the disclosure (see What if I cannot complete my disclosure within the time limits?) they will send you a letter confirming the extended time period. You will need to send this letter (or a notarised copy of it) to your FI within 30 days of receiving it.
You should provide any additional information in support of your disclosure that HMRC may ask for in order to check accuracy and completeness.
You will have 18 months from the date you receive notification from your FI to satisfy them that you have complied with your UK tax obligations. If you choose to participate in the LDF then within this period you:
The MOU sets out the joint understanding of the Liechtenstein Government and HMRC as to how the LDF will operate. The terms of the MOU can be varied by agreement between the parties or terminated by either party. If and when appropriate, the parties will issue clarification regarding issues relating to the MOU in order to ensure the orderly running of the facility, in accordance with the joint understanding between the parties as to how the facility will operate. The parties will provide any necessary further clarification through joint declarations and FAQ's.
The LDF does not affect your legal obligations to consider whether you should make a report, accordingly you may satisfy yourself that you fall within the privilege exemptions and will not need to make a report. If you make a report then HMRC recommends that you add a note to say that it is linked to an intended disclosure under the LDF, and ask for a copy to be sent to the HMRC Liechtenstein Desk. This will enable HMRC to ensure that the LDF procedures are applied correctly.
A report does not affect the terms of the LDF. Provided all the conditions and time limits of the LDF are satisfied, HMRC will not use the receipt of a report as a reason to commence a criminal investigation or a civil investigation under Code of Practice 9.
It is not necessary to wait for a notice from your FI before making a disclosure under the LDF. Where you consider you have a disclosure to make you should contact HMRC and register for the LDF as soon as possible. Early notification may help reduce any interest charge and the overall amount payable to HMRC.
If, at any time prior to registering for the LDF, you are notified that you are under investigation on suspicion of serious tax fraud or arrested for a criminal tax offence, you will not qualify for the terms of the LDF.
No. If there is a current Code of Practice 9 investigation you may not participate in the LDF. See also FAQ 1.22 in relation to criminal investigations.
No. HMRC will not give any assurances against a criminal tax investigation or a Code of Practice 9 investigation before the LDF application has been accepted. Subject to all other qualifying conditions being met, the terms of the LDF will apply once:
HMRC will process your registration application as soon as possible. Provided you qualify at the point your application was received, HMRC will deem the date of registration to be the date that they received your application.
Once your FI has notified you that they have reason to believe that you are a relevant person you must satisfy them that you are not a relevant person or that you are UK tax complaint. You can do this by registering for the LDF and providing your FI with the registration certificate sent to you by HMRC within 30 days of receipt. (You will also need to forward the disclosure certificate provided by HMRC following the submission of your disclosure.)
Alternatively, you can satisfy your FI in one of a number of ways:
Failure to satisfy your FI may result in financial services being withdrawn. Please also see FAQ I do not have a liability to UK tax so why should I incur the expense of appointing an adviser to certify that I am tax compliant?
Your adviser should review your tax affairs for the four tax years prior to you being notified by your FI. The review should determine whether you are compliant with your UK tax obligations in respect of the relevant property. The written confirmation should state the nature of the asset being certified as UK tax compliant. If you have an interest in relevant property managed by more than one FI you should ensure that each source is separately certified within the written confirmation.
Obtaining confirmation from a qualified UK adviser is just one of the ways in which you can demonstrate to your FI that you are UK tax compliant. Alternatively, you may register under the LDF to disclose to HMRC that you do not have a UK tax liability. HMRC will need to be satisfied that you have no liability to UK tax. HMRC will not charge you for this service.
HMRC will use the disclosure to determine the tax liability of the relevant person and they may also use the information with regard to UK tax liabilities of third parties. Where HMRC receive a formal request under an exchange of information agreement they may disclose where they are obliged to do so.
If you want to adopt this process and can demonstrate that you are UK tax compliant in respect of the relevant property, you may seek a letter of assurance from HMRC to give to your FI. You can contact the HMRC Liechtenstein helpdesk for advice. Alternatively you may adopt one of the other options - see My Liechtenstein FI has identified me as a relevant person. What must I do to ensure that I do not have my financial services terminated?
You cannot register or participate in the LDF if:
You will have been formally notified when you or your adviser receive notification by hand, by post or are advised by telephone. In most cases, the date of notification will be clear but where there is a dispute over the date of delivery in relation to notification sent by post, we will use the deemed delivery times generally adopted by HMRC:
Provided you are not 'under investigation' when you apply to register for the LDF and you meet the terms of eligibility, you will be able to participate. See FAQ 1.22
However, if you knowingly did not disclose your interest in any relevant property during the investigation, you will be subject to a significantly higher penalty. See the example at FAQ 6.6
If you have appointed a new adviser to act in respect of your LDF registration and disclosure, you will need to provide HMRC with a written authority that allows us to exchange and disclose confidential information about your tax affairs. You should forward the signed authorisation with your registration application. Where your new tax adviser will act on your behalf for all your future tax affairs, including tax matters outside the LDF disclosure, please use HMRC Form 64-8 for authorisation.
Where you have retained the services of more than one tax adviser, you will need to clarify which adviser HMRC should approach to discuss any issues concerning your LDF disclosure. You should also ensure that the tax adviser you appoint to complete your returns is aware of all your future tax liabilities.
(1) You can register for the LDF if you are eligible to do so and you have not received written notice that HMRC has commenced an investigation into your tax affairs under the Civil Investigation of Fraud procedure or been formally notified that you are under investigation for a criminal tax matter that has either led to your arrest or a formal caution.
(2) The decision to publish names and details of deliberate tax defaulters (Section 94, Finance Act 2009) apply to tax periods beginning on or after 1 April 2010. HMRC expects there to be a small number of taxpayers who register for the LDF while under an open enquiry or subject to a compliance check. Where the enquiry or compliance check started before the LDF registration and covers tax periods beginning on or after 1 April 2010, HMRC will look back at the quality of disclosure during the enquiry period. This will be taken into account in computing penalties and in determining whether the defaults will trigger publication as a deliberate tax defaulter.
Eligible persons who register voluntarily for the LDF without being under an existing open enquiry or compliance check will not be subject to publication as a deliberate tax defaulter because their full and complete disclosure under the LDF will mean that any penalties arising will attract the full reduction for quality of disclosure.
You may obtain further advice from the Liechtenstein Helpdesk.
You must hold relevant property or have an interest in relevant property as defined in the MOU which broadly means:
Please also see FAQ 5.1 What do you mean by an asset or an interest in an asset in Liechtenstein?
A financial intermediary is a person subject to supervision by Liechtenstein's Financial Markets Authority who provides a service to those holding investments in Liechtenstein.
You will have to provide the FI with one of the following:
Alternatively, you can provide permission for your FI to provide HMRC with all your details that they hold.
It is your responsibility to report any interest in relevant investments to HMRC and to satisfy your liability for all taxes due under UK law. If you do not know who your FI is, you should contact the financial institution in which you have your Liechtenstein Investments to obtain their contact details.
Once you have these details, or if you have Liechtenstein investments but have not received a notice, you should contact your FI and tell them of your intention to register for LDF. You should also contact HMRC's Liechtenstein helpdesk as outlined at How do I register for the LDF? to complete the LDF registration process.
Taking part in the LDF does not change our duty of confidentiality to you. HMRC will only provide information if they deem it to be necessary and they have your authority to do so.
You must send the certificates to your FI to prove to them that you have satisfied the conditions of the LDF.
The FI will require you to move your investments out of Liechtenstein or exceptionally, will keep your investment but you will face sanctions.
You should contact the HMRC Liechtenstein Helpdesk to register your details. You can do this by telephone or in writing using the contact details at What are my obligations under the facility?. You will need to provide the following information:
HMRC launched the LDF on 1 September 2009. Those registering have chosen to make their voluntary disclosures in advance of the introduction of the Liechtenstein Taxpayer Assistance & Compliance Programme (TACP).
By 31 March 2010 there were 419 registrations.
By 30 September 2010 there were 876 registrations.
By 31 March 2011 there were 1,351 registrations.
By 30 September 2011 there were 1,721 registrations.
HMRC has agreed to publish the number of LDF registrations as at 31 March and 30 September each year. HMRC will aim to publish figures by 31 May and 30 November through the LDF pages of the HMRC website. HMRC will also publish how much yield they have generated from the disclosures after the first full tax year of LDF operation and annually thereafter. The first publication of tax yield will be to 31 March 2011 and should be available by 31 May 2011.
By 31 March 2011 £140.08 million has been paid by those that have registered under LDF.
A Confirmation of Relevance is a statement issued by a Liechtenstein FI evidencing that the relevant person:
With effect from 1 December 2011 HMRC will require sight of the Confirmation of Relevance before an LDF registration application can be accepted.
Sample COR’s from a bank, fiduciary and insurance company can be found here.
The Confirmation of Relevance is evidence that you have relevant property in Liechtenstein at the point of registration. HMRC will not approach the financial intermediary and cannot obtain this on your behalf.
No, but we will require evidence that you have relevant property in Liechtenstein.
Yes (if you are applying to register at any time from 1 December 2011).
The Confirmation of Relevance is accepted by HMRC at the point of registration. HMRC will not suspend or withdraw your LDF registration because of variations in your Liechtenstein investment.
Yes. Please ask the Liechtenstein insurance company to provide a Confirmation of Relevance to submit with your LDF registration.
If you want to apply to register by telephone please ensure that you are able to forward the Confirmation of Relevance by fax or email at the time you call. HMRC cannot accept an application with effect from 1 December 2011 unless it is accompanied by a Confirmation of Relevance.
No. The requirement to produce a COR from 1 December 2011 is only part of the process in determining eligibility criteria. HMRC has discretion to refuse a LDF registration application where you do not fulfil the other eligibility requirements of the LDF irrespective of whether a COR is produced.
HMRC will help by providing a disclosure form, complete with guidance. It will explain that you will need to provide HMRC with sufficient information and evidence to show that you are properly reporting any UK liabilities payable under this facility.
The information needed may include but will not necessarily be limited to:
HMRC will expect a disclosure under LDF to be full and complete. This will generally include world wide income, profits, gains, assets and liabilities. If you are not domiciled for the purposes of UK tax you will need to declare income, profits, gains, assets and liabilities relating solely to your UK tax liability.
HMRC will not expect to receive and will not request information on any assets or interests of a UK taxpayer that are not relevant to the UK tax liabilities under the LDF.
Each person seeking to disclose under the LDF must be an eligible person and make a disclosure in their own name. Income and gains accruing on a joint asset should be divided according to legal ownership.
The Disclosure Pack contains forms that must accompany your disclosure. HMRC will require:
For further guidance please contact the Liechtenstein Helpdesk.
Where deliberate behaviours are demonstrated, payment of UK tax liabilities under the LDF go back:
Where exceptionally, behaviours are not considered deliberate the following time limits will apply:
(Inheritance Tax time limits differ from the above exceptions.)
You should not delay notifying HMRC while you are waiting for your Liechtenstein FI to provide you with details of your income and gains. You can protect yourself from ongoing penalties by informing HMRC of the source of the income and gains and putting a realistic estimate of your liabilities on your return.
Once you have established the correct figure of income and gains you must notify HMRC of the corrected figure. If this is increased from your original estimate, HMRC will charge interest on the increased liability or compute repayment interest if there is a reduced liability. HMRC will only charge a penalty if you knowingly underestimated your liability, failed to take reasonable care in establishing a realistic estimate or delayed notifying HMRC of the corrected figure in a reasonable time once this became available.
You must contact the Liechtenstein Helpdesk immediately if you will not be able to make your disclosure within the time limits. HMRC will consider your reasons and where appropriate, agree to give you additional time to complete your disclosure. If HMRC agree to extend the time limit we will send you a letter confirming the extended time period you have been given and you will need to send this to your FI.
No. The disclosure certificate allows you to satisfy the FI that you have complied with LDF so your investments can remain in Liechtenstein. HMRC will write to you separately to either confirm your offer has been accepted or to ask for further information if this is needed and they will aim to do this within six months of receiving your disclosure.
HMRC will examine all disclosures made under the disclosure facility to determine whether they are full and complete and whether they have been made on the correct basis.
You will need to provide HMRC with sufficient information to show that you have properly accounted for all UK liabilities payable under this facility. In the case of a straightforward disclosure a simple narrative may be sufficient. Where the acquisition of the funds or the nature of the investment is complex, HMRC will expect your disclosure to be sufficiently detailed to explain how you acquired the funds to ensure that all associated tax liabilities are accounted for within your disclosure. In all cases we will need to know the source of the funds even where these originated outside of the disclosure period.
When HMRC receive a disclosure they may need to contact you to seek assurances that the disclosure meets the full terms of the LDF. HMRC will carry out a risk assessment in all cases and where HMRC suspect that there are material omissions from your disclosure they may withdraw the LDF terms and commence either a criminal or civil investigation. Where HMRC have an alternative view on the tax treatment of your disclosure they may commence a civil investigation.
You can minimise the risk of being investigated by setting out fully the source of the funds, the tax treatment you have adopted and how you arrive at the tax liability when submitting your disclosure. (See FAQ above.)
The certification procedure is intended to demonstrate to the FI that the person has registered and subsequently made a disclosure to HMRC under the terms of the disclosure facility. There is no requirement on the FI to establish that the disclosure is complete. HMRC will be responsible for agreeing the disclosure and if it is found to be incomplete then HMRC will take appropriate action.
You will only be eligible for the terms of the LDF if you make a complete and accurate disclosure of all your UK tax liabilities. Where HMRC suspect that your disclosure is incomplete, they may withdraw the terms of the LDF.
How HMRC decide to pursue further enquiries will depend on the nature and extent of the suspected omissions and the information we hold. Where HMRC establish that there are deliberate and material omissions, they may refer the matter for criminal tax investigation.
HMRC expect disclosures to be made within the LDF time limit but if you need further time to make your disclosure, you are encouraged to contact the Liechtenstein Helpdesk. If HMRC can agree to an extension of the time limit, they will expect to receive the disclosure by the agreed date. See also FAQ 4.7
If you do not submit your disclosure within the specified time limit (or following any extension that HMRC agree), you will not be able to benefit from the terms of the LDF and HMRC will withdraw the LDF registration. See also FAQ 1.9
The LDF is only available in relation to previously undisclosed liabilities. It is not available to cover settled UK liabilities or liabilities that are final but remain unpaid.
An asset or an interest in an asset in Liechtenstein refers to 'relevant property' or an interest in relevant property. The meaning of relevant property is explained within the Memorandum of Understanding (PDF 108K) on page 9.
In relation to an offshore trust, the trust will be 'relevant property' if, for example:
In relation to an offshore company, the company will be 'relevant property' if, for example:
All persons acquiring a Liechtenstein asset will be expected to have a meaningful connection with Liechtenstein. Although no financial limits are set by HMRC, financial intermediaries are expected to apply minimum investment levels or other qualifying terms.
All financial intermediaries are expected to issue a Confirmation of Relevance to investors seeking to qualify for the LDF. With effect from 1 December 2011 you will need to provide this to HMRC at the point of registering for the LDF and HMRC will not be able to admit registrations without the Confirmation of Relevance from that date.
Interest is calculated from the date tax should have been paid until the date you actually pay that tax to HMRC. HMRC's published rates of interest will apply within LDF. If you elect for the Composite Rate Option interest is chargeable from 1 July next following the accounting year, assessment period or charging period in which the liability arises.
If you consider the failure is due to innocent error you should call the helpdesk before making your disclosure. As part of the LDF bespoke service HMRC will discuss the circumstances with you and they may request documentary evidence to support what you say before HMRC reach a decision on whether innocent error applies. Where HMRC accepts that the loss of tax was wholly attributable to innocent error they will explain what you need to do.
Either you or, if applicable, your professional adviser, should contact the Liechtenstein Helpdesk at HMRC who will give you any necessary assistance. The contact details can be found at What are my obligations under the facility?
You will declare personal liabilities from 2005 and give sufficient details of the source of the funds to enable HMRC to consider the completeness of your disclosure. Your father's estate and executors may have liabilities prior to 2005. HMRC may seek to recover the earlier liabilities.
If you elect for the CRO you will be responsible for all liabilities that are in date for assessment for the period commencing April 1999. HMRC will not take any further action against the estate or executors regarding this source as it is now covered by LDF terms.
You will calculate the gain in the normal way using the original cost or value at the acquisition date. If you opt for CRO you will not allow reliefs or deductions. If you do not opt for the CRO you may utilise all appropriate reliefs and deductions.
Yes, provided you are otherwise eligible for the LDF and you held (i) an offshore account or asset as of 1 September 2009 and (ii) relevant property as of the date of your registration and disclosure under the LDF, you will qualify for the favourable LDF terms.
If you do not have an offshore account or asset as of 1 September 2009 you will not qualify for the shorter limitation period, the fixed penalty or the composite rate option.
HMRC expects a full and complete disclosure to be made. However, if a simple error has occurred this should not effect the penalty percentage level. If HMRC is deliberately misled or you disclosure is found to be materially incomplete the LDF terms may no longer apply to your disclosure.
LDF offers a bespoke service to assist you in clarifying any areas of doubt. You should contact the Helpdesk should you require any help.
No. HMRC will only seek information in relation to the eligible person who is making the disclosure. This would not generally extend to non UK beneficiaries of a trust who do not have UK tax liabilities.
No. The cost of the asset and the capital gain is computed in accordance with the law. The original value is determined under normal rules.
Interest should be properly payable in accordance with UK law and must take account of the increased liabilities on the payment on account that should have been made for subsequent years. For example, if tax is increased for 1999-00 you will need to consider the adjustment required to the payments on account for the following year (2000-01) due on 31 January 2001 and 31 July 2001.
Each FI will carry out a review before 31 March 2015 to identify those clients who may be liable to UK taxation. If you are notified by your FI you will be asked to demonstrate that you are UK tax compliant or that you have no liability to UK taxation. You will generally only be expected to do this once (for each FI who manages investments on your behalf) during the period ended 31 March 2015.
Where you previously provided confirmation that you had no UK tax liability, your FI will need assurances that the changed circumstances do not affect your UK tax liability. You have a legal obligation to notify HMRC once you become liable to UK taxation and you should not rely solely on any confirmation you previously gave to your FI.
If you have registered for the LDF and provided your FI with a disclosure certificate, or you had provided your FI with alternative written confirmation from HMRC certifying that your tax affairs are in order, then your FI will continue to offer financial services.
There are tax geared penalties if you fail to notify HMRC within the time limits.
The FI is under a duty as part of the TACP to notify all persons with a beneficial interest in relevant property who may be liable to UK taxation. FI's may not have sufficient facts or knowledge of UK tax legislation to be in a position to independently accept that a client has met all of their tax obligations. For example, there may be information that has a bearing on a person's domicile or residence status that is unknown to the FI.
The evidence or certification produced by the client is intended to show that they:
Because you have been identified as an individual who may have a liability to UK tax you will need to provide evidence or a certificate (see 'My Liechtenstein FI has identified me as a relevant person. What must I do to ensure that I do not have my financial services terminated?') to permit your FI to continue providing relevant services.
HMRC or the qualified agent will guide you on what evidence they may wish to see.
With effect from 1 December 2011 HMRC will require sight of the Confirmation
of Relevance before an LDF registration application can be accepted (see
What is a Confirmation of Relevance?)
The LDF terms available to you will depend on whether you held an offshore
account or asset at 1 September 2009.
No. The use of estimates is only permissible where it is not possible to determine the liability using existing records.
HMRC may learn of a situation that could restrict its ability to assess in full arrears of tax that would otherwise be due under a complete and accurate LDF disclosure. In appropriate circumstances, HMRC may raise protective assessments in accordance with UK law before the relevant time limits expire.
The exceptions are where:
Where you have not previously been subject to investigation nor been contacted by HMRC, a penalty of 10 per cent will apply to 5 April 2009. For subsequent tax years, provided you make a full and complete disclosure under the terms of the LDF, a penalty of 20 per cent will apply as you failed to notify HMRC that you were chargeable to tax.
Where you can demonstrate that you had a reasonable excuse for your failure no penalty will be sought. HMRC will consider the circumstances of each case.
Where none of the exceptions under the LDF apply, a penalty of 10 per cent will be chargeable for tax years up to 5 April 2009. For tax years following this date the penalty will be based on the minimum level appropriate under UK legislation for deliberate behaviour.
For 2009-10, provided you make a full and complete disclosure under the LDF, the penalty will be 20 per cent.
Provided a full and complete disclosure is made in accordance with the LDF, a penalty of 20 per cent will be chargeable for tax years up to 5 April 2009. For tax years after this date the penalty will be based on the minimum level appropriate under UK legislation for deliberate behaviour.
For 2009-10, provided you make a full and complete disclosure under the LDF, the penalty will be 20 per cent.
Where none of the exceptions under the LDF apply the fixed penalty of 10 per cent will be chargeable for tax years up to 5 April 2009. As you have received taxable income from the offshore foundation for many years it is considered that you have consistently failed to notify your chargeable income to HMRC and your behaviour is deliberate. In these circumstances the penalty will be based on the minimum level appropriate under UK legislation for deliberate behaviour.
For 2009-10, provided you made a full and complete disclosure under the LDF, the penalty will be 20 per cent.
HMRC take the view that you deliberately concealed your investment. On the assumption that you now make a full and complete disclosure, settling all outstanding liabilities in full, HMRC will apply a penalty of 30 per cent for the tax years up to 5 April 2009. For tax years following this date the penalty will be based on the minimum level appropriate under UK legislation for deliberate and concealed behaviour.
For 2009-10, provided you made a full and complete disclosure under the LDF, the penalty will be 30 per cent.
If a full and complete disclosure is made in accordance with the LDF the fixed penalty of 10 per cent will apply for tax years up to 5 April 2009 provided none of the exceptions under the LDF are applicable. For tax years following this date the penalty will be based on the minimum level appropriate under UK legislation for deliberate and concealed behaviour.
For 2009-10, provided you made a full and complete disclosure under the LDF, the penalty will be 30 per cent.
The new penalty regime in the March 2010 Budget has yet to become law but if enacted will apply for tax years from April 2011. It is important that you make a disclosure as soon as possible to avoid the risk of a higher penalty that may be imposed by legislation.
Provided you make a full and complete disclosure under the LDF, the fixed penalty of 10 per cent will apply to 5 April 2009, assuming none of the exceptions under the LDF are applicable. If a penalty is due for later years it will be charged in accordance with the law applicable at the time and may reflect any future budget changes.
A person eligible to participate within the LDF must calculate their UK liability in accordance with UK law and make an appropriate disclosure to HMRC. Alternatively, a single composite rate, the CRO, may be used to calculate the amount due. Where an election to apply the CRO is made, the calculation will be accepted by HMRC in lieu of all UK taxes otherwise due on the actual basis for the tax years of disclosure up to 5 April 2009.
If an election is made for the CRO, it must be applied for all tax years that are included in the disclosure from 6 April 1999 (1 April 1999 for legal persons) to 5 April 2009. The CRO ends on 5 April 2009 (31 March 2009 for legal persons) and from this date normal UK taxation rules apply for each following year. However, see the example below.
(i) The election to calculate and pay under the CRO is irrevocable. A UK taxpayer electing for the CRO must:
(ii) Each UK taxpayer that discloses under the LDF may choose whether to elect for the CRO or to calculate the UK liability on the actual basis in respect of their interest.
(iii) The CRO covers all UK taxes and duties included in the LDF disclosure for all UK tax years from 6 April 1999 (1 April 1999 for legal persons) to 5 April 2009.
However, the value of the benefit (power to enjoy) will not include a benefit or power in respect of which there is no unpaid UK tax liability under UK tax law and practice in respect of the UK taxpayer (or the relevant predecessor-in-interest). (See also point (vi) below.)
(iv) The CRO may also cover taxes due during the disclosure period by any deceased predecessor-in-interest, such as a deceased parent and the executors of their estate in the case of an inheritance. Either the executor or the successor-in-interest, or both, can disclose under the LDF any unpaid UK taxes in respect of the interest asset for the respective applicable periods.
Where the predecessor-in-interest is living (or existing, in the case of legal entities) at the time of disclosure, then such predecessor-in-interest should disclose under the LDF any unpaid UK taxes in respect of the interest or asset for the period during which such predecessor-in-interest held it. In addition in that case, the successor-in-interest should disclose under the LDF any unpaid UK taxes in respect of the interest or asset for the period during which such successor-in-interest held the interest or asset.
A Liechtenstein fiduciary and entities such as foundations may themselves register under the LDF and pay under the CRO unpaid UK tax liabilities (if any) in respect of the settled property for which they are liable in respect of their fiduciary capacity.
The CRO calculation will apply to any income, profits, gains and other sums properly chargeable to tax from the property that gave rise to the unpaid UK tax liability under UK tax law and practice.
(v) Capital gains and losses within a UK tax year may be aggregated in determining the figure to which the CRO applies.
(vi) The CRO does not apply to income, profits, gains and other sums properly chargeable to tax previously disclosed. Any allowances, reliefs or deductions previously claimed against disclosed income will remain undisturbed and no settled liabilities will be reopened.
(vii) Where there is no unpaid UK tax liability in respect of the UK taxpayer (or the relevant predecessor-in-interest) in respect of an asset/property (or interest therein), then income, profit and gains from such asset/property (or interest therein) will not be included in the UK tax calculation under the CRO.
(viii) Under the CRO the same income, profits and gains will be subject to UK taxation only once (rather than twice - at the level of the legal/fiduciary entity and also at the level of the shareholders/beneficiaries).
No. The CRO will end at 5 April 2009.
However, HMRC is considering whether a Single Charge Rate (SCR) will be available as an alternative method of calculating liabilities under the LDF. HMRC will consider each tax year (to 2014-15) in isolation after the year has ended. If a SCR is made available HMRC will announce publicly the terms, procedures and rate of charge at the appropriate time.
The composite rate is a single rate of 40 per cent which can be used as a means of calculating an amount which HMRC will accept in satisfaction of past tax liabilities. The amount will cover all UK taxes (including UK Inheritance Tax, Income Tax, Corporation Tax, Capital Gains Tax, Stamp Duty and Value Added Tax and, without limitation, National Insurance contributions). The rate will be applied to all income, profits, gains and other sums chargeable with no reliefs or other deductions to be allowed. Interest and penalties will be due in addition to the composite rate.
The only exception to this is that tax withheld under the European Union Savings directive or under the Agreement on the Taxation of Savings between the EU and Liechtenstein may be offset.
You do not have to use the composite rate. You can choose to calculate your liability using the normal rules, which will mean you are able to claim any reliefs and deductions due.
You may want to seek advice from your tax agent or advisor about whether the composite rate will be of benefit to you.
No. If an election is made it has to cover all years April 1999 - April 2009 for which an LDF disclosure is made. The CRO does not extend to disclosure periods after April 2009.
Firstly, the CRO allows a simple and quick method of calculation of liability. Secondly, certain transactions may attract tax on more than one head of duty and hence the effective rate may be greater than 40 per cent.
Yes. The CRO allows the liabilities of more than one person to be settled as they relate to connected transactions.
Yes.
Under the CRO you will be chargeable on all liabilities going back to 1999. This will include taxes due from any predecessor in interest and the executors of their estate. On the actual basis unassessed liabilities prior to 1999 will not be assessed if they arise on you.
No. The losses accruing in or prior to 1997 may not be utilised in a later year. Nor may the loss be carried forward to utilise in a future period beyond the disclosure period.
No. Losses may not be carried forward. Losses/gains within a year may be aggregated in arriving at the figure for applying the CRO.
The CRO is applied against previously undisclosed sources of income. You need not disturb previously relieved losses, nor may you open previously settled years to reallocate losses in preference to undisclosed liabilities.
The CRO is only applied to sources disclosed under the LDF. Existing settled computations of liability should not be disturbed. For the avoidance of doubt, if the original computations carried forward excess losses to a later year these should remain undisturbed notwithstanding that there is now undisclosed income available to utilise the losses in the current period.
No.
Interest is chargeable from 1 July next following the accounting year, assessment period or charging period in which the liability arises.
No. If you elect to use the CRO you must apply it to all undisclosed income, profits, gains and other sums chargeable for the entire period to 5 April 2009 with no relief's or other deductions to be allowed.
No. Relief's, deductions and allowances are not available to bring forward or carry forward under the CRO.
While a single charge rate will not be available for the tax year 2009-10 the position for 2010-11 is presently subject to further detailed consideration. If and when it is decided that such an alternative rate is made available, HMRC will publish the terms, procedures and rate of charge at the appropriate time.
Following an election for the CRO to apply, you will need to consider the
income, profit, gains and other sums chargeable to tax in respect of all
your asset/property when making the CRO calculation. If any account is not
subject to taxation in the UK under normal tax rules, it may be excluded
from this consideration. However, if it is taxable in the UK in any way,
then it will need to be included in the overall consideration and calculation
of the tax due under the CRO.
As Account A has been taxed correctly and Account C is not taxable under
normal rules, both may be excluded from the CRO calculation. Account B will
need to be included in the CRO calculation.
As the composite rate is not calculated by reference to taxable amounts remitted
the CRO calculation in this case will be made by reference to the income
of £100,000 per annum that is earned by account B and will be taxed
at the 40 per cent composite rate for each tax year up to 5 April 2009 that
is included in the disclosure.
There are times when the strict statutory basis may be more appropriate than
the CRO. It is important that you fully consider the options available to
you before making an irrevocable election for the CRO to apply.
No. Each of your accounts will need to be considered to establish from the facts available whether the amounts held within the account contain income, gains or capital. Where the income, profit or gains have been taxed under the CRO calculation for LDF purposes, then the amount included in the CRO calculation may be regarded as income that has already suffered UK tax. If you are uncertain about the precise nature of your offshore holdings, please discuss the matter with HMRC Liechtenstein (LDF) technical support team member.
As the income arising in the offshore settlement is deemed to be yours in accordance with the Transfer of Assets Abroad legislation, the CRO calculation will be based upon the income of the settlement for each year up to 5 April 2009 covered by your disclosure. If the full favourable terms of the LDF apply, then the £1 million settled in 1980 will be outside of the time limit but the £50,000 earned income per annum will need to be taken in to account under the CRO calculation for taxable years from April 1999 to April 2009.
As you are not subject to the Transfer of Assets Abroad legislation and the trust is discretionary, the income of the trust cannot be deemed to be yours. In the circumstances, the CRO calculation will be based upon the £20,000 income you have received and failed to declare to HMRC.
The tax due on dividends under the CRO is calculated without reference to reliefs or deductions. In contrast, tax withheld on interest under the European Union Savings Directive (or under the Agreement between the European Community and Liechtenstein providing for equivalent measures) will be allowed. The foreign tax deducted from your dividend does not fall within the European Union Savings Directive and must not be taken into account when calculating the tax due under the CRO. Your CRO calculation must be based upon the gross amount of the dividend disregarding the foreign tax deduction that was applied.
The CRO election will enable you to settle the tax liabilities for yourself and the company for the tax periods ending in April 2009. However, the CRO does not displace the company’s requirement to submit accurate financial statements/accounts, nor does the CRO cover any tax liabilities that may be due for 2009-10 and thereafter. The company’s accounts will need to be adjusted to reflect properly the profit that has been extracted during all disclosure periods. Any tax liabilities that may arise as a consequence of this adjustment must be calculated and submitted for each tax year after 2008-09 in accordance with the appropriate UK legislation.
If you acquired a Liechtenstein investment after 1 September 2009 and did not already hold an off shore investment you may qualify for the LDF but you will not be eligible for the shorter limitation period, the fixed penalty and the Composite Rate option.
No. A person who participates in the disclosure facility and has as of date of signing of the MOU a bank account, including a financial (portfolio) account, outside the UK or Liechtenstein which is in his or her name and was opened through a UK branch or agency of that bank, will not, in relation to that account, be eligible for the shorter limitation period, the fixed penalty and the composite rate option under the LDF.
You will still not qualify for the ten year limitation period, the fixed penalty, and the composite rate in respect of the tax due from the investment in the prior offshore account that you opened through a UK branch or agency. The words 'in relation to that account' cover any unpaid taxes on that prior account. In other words, if you move the funds later, the unpaid back taxes prior to the move would still be 'in relation to that account' and not in relation to the new account.
You can register from 1 September 2009 and LDF terms will apply. The income accruing on the Liechtenstein investment and the profits/gains will be assessable from April 1999 with interest and penalty under the LDF.
You can register for LDF from 1 December 2009 but the ten year limitation period, the fixed penalty and the composite rate option do not apply to the tax due in relation to offshore accounts opened through a UK branch or agency. Both the income accruing on the investment and the profits/gains will be assessable for all in date years with interest and penalty. If you registered for the NDO by 4 January 2010 you will qualify for penalty rates under those terms.
You can register for the LDF from 1 January 2010 but the ten year limitation period, the fixed penalty and the composite rate option do not apply to the tax due in relation to offshore accounts opened through a UK branch or agency. The NDO ceased to apply from 4 January 2010 so you will run the risk of HMRC commencing an investigation unless you register under the LDF or make a voluntary disclosure to an HMRC office. Both the income accruing on the investment and the profits/gains will be assessable for all in date years with interest and penalty. Although you will not be eligible to the fixed penalty the voluntary nature of the disclosure will be reflected in the level of penalty charged.
You can register for the LDF from 1 December 2009. Both the income accruing on the offshore investment and the profits/gains will be assessable from April 1999 under the terms of the LDF with interest and penalty. Because the funds have not been held in an offshore account opened through a UK branch or agency HMRC will not extend the period of assessment to UK tax years prior to 1999-00.
If your client is eligible for participation in the LDF, they can register to do so unless they have been notified that they are now under investigation for suspected serious fraud, or they have been arrested for a criminal tax offence.
Where you have made a full disclosure of the facts and the dispute is one of interpretation you will be treated as having made a full disclosure. However, HMRC reserves the right to undertake the necessary action to resolve the issue.
As you acquired a Liechtenstein investment after 1 September 2009 and did not hold an offshore investment at that time you may qualify for the LDF but you will not be eligible for the shorter limitation period, the fixed penalty and the Composite Rate Option. However, you may benefit from other terms, such as the bespoke service and the assurance against criminal tax investigation provided you qualify.
As you have acquired a Liechtenstein investment you may qualify for the LDF but because the only overseas asset at 1 September 2009 was an offshore bank account opened through a UK branch or agency you will not benefit from the shorter limitation period, the fixed penalty or the CRO in relation to your disclosure.
Yes. If there are UK tax liabilities that have not previously been disclosed, the legal representatives of a trust or entity (for example the trustees, directors, etc) may make a disclosure on behalf of the trust or entity. Similarly, a beneficiary, beneficial owner, shareholder, settlor, etc, may also register for the LDF in respect of any previously undeclared tax liabilities.
The fact that a UK broker holds and manages the account does not affect the availability of the full terms of the LDF (unless the bank account of the non-UK entity or trust was opened through a UK branch or agency of that bank - in which case see FAQ 8.6)
