UK Announces Details Of Liechtenstein Disclosure Facility


The UK government has announced details of the “groundbreaking” disclosure agreement with Liechtenstein that will give UK taxpayers with undisclosed accounts in the Alpine jurisdiction the opportunity to disclose income at a reduced penalty, or face having their accounts shut down.

The so-called Liechtenstein Disclosure Facility (LDF) agreement, signed by the two governments on August 11 along with a broader Tax and Information Exchange Agreement (TIEA), will allow penalties on unpaid tax to be capped at 10% of tax evaded over the last 10 years providing that the account holder makes a full disclosure to HM Revenue and Customs (HMRC).

However, those who do not make a full disclosure by the end of the program, which runs from September 1, 2009 to March 31, 2015, will find their Liechtenstein accounts closed down. They may also face penalties on any unpaid tax of up to 100%.

“Today’s agreements are very good news for honest taxpayers and investors everywhere. And they represent a big step forward for tax transparency,” commented Stephen Timms, the UK Financial Secretary to the Treasury, who signed the agreements with Liechtenstein’s Prime Minister, Klaus Tschutscher.

“I am grateful to the government of Liechtenstein for their goodwill, determination and professionalism to find an effective way forward in a difficult and complex area,” Timms added. “HMRC and Liechtenstein government officials have worked extremely hard to arrive at these ground breaking agreements which mean that investors can in future take advantage of the skills and experience of Liechtenstein’s investment and banking services.”

Under the agreement, Liechtenstein financial intermediaries will have to review all clients, identifying those who need to confirm their tax position with HMRC and advising them to do so within a specific time frame. Where a UK investor confirms to the intermediary that they are cooperating with HMRC, the financial intermediary can continue to provide financial services to that person. Where a UK investor cannot confirm that they are cooperating with HMRC, the financial intermediary must withdraw financial services in Liechtenstein or apply various “sanctions.”

The Liechtenstein government is due to introduce new laws to oversee this process.

To take part in the program, investments must either be held in Liechtenstein on August 1, 2009, in which case the person can participate from the start of the facility on September 1, or, if the investments or assets are moved into Liechtenstein after that date, the person can participate from December 1, 2009, at the end of the registration period for the UK’s general offshore income disclosure scheme, known as the New Disclosure Opportunity.

The recovery of earlier years’ tax lost will be restricted to a maximum of 10 years up to April 5, 2009 and the agreement will allow the taxpayer to elect to apply a special composite rate of 40% to cover all taxes on an annual basis without the benefit of any relief or deduction.

Both HMRC and the Liechtenstein authorities expect that by the end of the facility, all UK taxpayers holding assets and investments in Liechtenstein will be “meeting all their UK tax liabilities.”