Opportunity to regularise your offshore tax affairs

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19 November 2010

This article written by Kaiser Ritter Partner, whose executive chairman helped to negotiate the Liechtenstein Disclosure Facility (LDF) with HMRC on behalf of Liechtenstein, provides a useful insight into the LDF. 

For many years, Liechtenstein has been known as a tax haven – a tiny and opaque jurisdiction where the world’s wealthy could take advantage of low taxes and strong banking secrecy laws to shelter assets from the taxman. The low taxes and commitment to client privacy remain. But its image as a shelter for tax evaders is rapidly becoming outdated. 

Much of this can be credited to Otmar Hasler, Prime Minister between 2001 and 2009. Hasler created the Futuro Committee, a panel of experts including Fritz Kaiser, executive chairman of Kaiser Ritter Partner, to develop a vision for Liechtenstein’s future as a financial centre. One of the committee’s first tasks was addressing international regulatory pressure over tax compliance.

A forward looking strategy was developed and the 2009 "Liechtenstein Declaration" set out Liechtenstein’s commitment to go beyond existing OECD standards in transparency and information exchange. Bilateral agreements with various countries followed, including the unique understanding reached between Liechtenstein and the UK in 2009. The negotiated arrangements included the introduction by Liechtenstein of a five-year taxpayer assistance and compliance programme and the introduction by the competent authority of the UK of the LDF. As part of the arrangements, the UK and Liechtenstein have entered into a Tax Information Exchange Agreement accompanied by a Memorandum of Understanding and a Joint Declaration concerning the arrangements between the Liechtenstein Government and HMRC.

The arrangements between Liechtenstein and the UK go above and beyond OECD standards, offering UK residents the opportunity to regularise their tax affairs on extremely advantageous terms.

How the LDF works

Compared with previous disclosure opportunities offered by HMRC, the LDF offers real incentives for tax payers to regularise their tax affairs.  Defining characteristics include:

  • Fixed 10% penalty on unpaid tax
  • No penalty in cases of "innocent error"
  • "Look back" period limited to accounting periods/tax years commencing on or after 1 April 1999 (the "10 year" look back)
  • Option to use a  40% "composite" rate or calculate and pay actual tax due
  • Guaranteed immunity from prosecution for tax related offences
  • No naming and shaming
  • "Bespoke" service from HMRC including the option of a "no-names" discussion

The LDF is open to virtually all UK residents with offshore accounts, not just those with an existing account in Liechtenstein – to take advantage of it, all you need to do is to establish an interest in "relevant property", which could involve, among others, opening a new account in Liechtenstein.

Although the LDF runs until August 2015, clients are advised to register for it as soon as possible, since you will not be able to take advantage of the facility if HMRC starts investigating your tax affairs before you have registered.

The Kaiser Ritter Partner Group

The Kaiser Ritter Partner Group (based in Liechtenstein and Switzerland) represents the interests of high net worth families, helping private clients and advisers protect and grow their assets over the long term. Over the last five years, a key focus has been developing transparent solutions to international tax compliance issues in response to the new environment for banks and trust companies.  It offers clients a wide range of services, including private banking, trust services and reporting systems for UK tax compliance.

Kaiser Ritter Partner has developed a wide range of banking and trust services especially for the LDF, all of which offer fast-track execution and transparent pricing.

But it is important to recognise that Liechtenstein is more than just the LDF. It has a solid budget surplus and a government that is committed to the development of financial services.  This means the jurisdiction is a real alternative for any UK resident client, domiciled or non-domiciled, who wishes to diversify their banking and investment arrangements.

For further information on the LDF please contact John Barnett on +44(0) 117  902 2753 or on john.barnett@burges-salmon.com or to contact Kaiser Ritter Partner please email ldf-desk@krpartner.com

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