Big increases in the amount that HMRC estimate their Liechtenstein Disclosure Facility (LDF) will bring in have to date largely been prompted by the UK’s tax deal with Switzerland.
HM Revenue and Customs (HMRC) said on Monday that they estimate the LDF will bring in up to £3 billion by 2016, compared to an original estimate of £1 billion.
Under the controversial UK-Swiss deal, undeclared money held in Swiss bank accounts by UK citizens will be subject to a hefty anonymised one-off charge and an annual ‘withholding tax’ on interest.
Gary Ashford, who represents the CIOT on HMRC’s Compliance Reform Forum, explained:
“We have seen a steady increase in the use of the LDF. This seems to have been largely down to UK citizens with accounts in Switzerland opening bank accounts in Liechtenstein to make use of the LDF.
“When Swiss assets are involved it is essential to compare the effect of the Liechtenstein agreement with the yet to be ratified Swiss/UK agreement. The Liechtenstein agreement requires a disclosure to HMRC whereas the Swiss agreement essentially provides the opportunity for UK citizens holding untaxed assets in Switzerland to regularise their tax affairs by way of an anonymised one off payment.”
Gary Ashford confirmed that CIOT members have seen a number of cases of taxpayers with Swiss accounts opening Liechtenstein accounts and disclosing direct to HMRC to gain complete assurance. The terms of the Liechtenstein agreement, given the Protocol issued in March, are in many ways more attractive than the Swiss agreement, particularly in relation to the treatment of inheritance tax for people who died before 2009.
“With the Liechtenstein financial intermediaries having written to UK clients with assets in Liechtenstein in March, we will start to see more of those who the agreement was specifically aimed at starting to regularise their tax affairs.”
The CIOT has also raised the question of HMRC having a disclosure facility for Switzerland similar to that for Liechtenstein.