The UK Government has recently announced that the beneficial terms of the Liechtenstein Disclosure Facility (LDF) will cease on 31 December 2015 (the facility had previously been due to run until April 2016). The LDF is a tax disclosure process through which individuals can bring their tax affairs up to date with HMRC on favourable terms and in particular benefit from reduced penalties and full immunity from criminal prosecution.
The LDF, and a number of other current disclosure opportunities, will instead be replaced by a new “last chance” disclosure facility that will run until mid-2017 but will offer much less favourable terms. It is anticipated that the penalties imposed will be higher and there will be no guarantee of immunity from criminal prosecution.
The UK Government has also recently announced its intention to increase compliance efforts in relation to undeclared foreign assets. The introduction of this new, less favourable facility will therefore coincide with an anticipated increase in HMRC’s investigation and compliance activity in the coming years.
HMRC’s future efforts to scrutinise the tax affairs of those with potential UK tax liabilities will be greatly assisted by the introduction of a raft of information exchange initiatives (primarily focusing on financial information and tax compliance) with other countries within Europe and throughout the world.
By September 2016 HMRC is due to receive the first tranche of information relating to accounts and structures from financial institutions in the British Crown Dependencies (Jersey, Guernsey and the Isle of Man) and British Overseas Territories (Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Montserrat and the Turks and Caicos Islands) via the intergovernmental agreements reached with these jurisdictions.
An even more significant development is that, approximately 12 months later, HMRC will start receiving similar information from jurisdictions that are “early adopters” of the new international Common Reporting Standard (CRS).
The CRS is a new global standard for the automatic exchange of account information between tax authorities around the world. The UK is one of the “early adopters” which also include jurisdictions such as Cyprus, Liechtenstein, San Marino and the Seychelles. In total, over 90 jurisdictions have pledged to adopt the CRS in due course. The CRS has a much wider scope than the agreement with the British Crown Dependencies and Overseas Territories as it makes no distinction between UK domiciled and non-UK domiciled individuals. For example, foreign jurisdictions will gather information on all bank accounts and trust assets controlled by non-UK domiciled individuals to share with HMRC (not just in relation to income remitted to the UK).
Finally, in May 2015 the EU agreed an automatic exchange of information agreement with Switzerland. This agreement will come into force on 1 January 2017. The EU is also currently
negotiating similar agreements with Andorra, Liechtenstein, Monaco and San Marino.
Put simply, there has never been a better time to take advantage of the beneficial terms of the LDF in
order to regularise your UK tax affairs should they have failed to keep pace with UK reporting obligations.
(This article has been written by my colleagues John Forde and Matthew Biles. For the full version of the article, click on the link below):