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HMRC has restricted the number of scenarios in which taxpayers can use the Liechtenstein Disclosure Facility for offshore liabilities, due to concerns about the system being open to abuse.

The LDF which will enable any persons with undisclosed tax liabilities held in offshore bank accounts to obtain a generous settlement with HMRC, by moving funds into Liechtenstein. The scheme was originally due to end in March 2015, but strong demand has seen the deadline extended until 5 April 2016.

However, HMRC believes that the facility is being increasingly abused by companies who use Employee Benefit Trusts (EBT) as a means of tax avoidance. The new agreement will now mean that access to some of the favourable terms offered by the facility is being restricted in certain circumstances.

Under the most favourable terms, successful LDF applicants will pay a 10% fixed penalty on any underpaid liabilities in relation to periods up to 5 April 2009. Furthermore, the furthest that HMRC can go back is April 1999 and there is an option to choose a single fixed rate of 40% rather than calculate the whole liability on a yearly basis.

These terms will not be offered to taxpayers whose offshore liabilities have not been reported to HMRC. In cases where disclosures are already linked to an intervention less than three months old, such as those under Disclosure of Tax Avoidance Scheme rules, are also exempt from the LDF. Cases without significant connection between the liabilities being disclosed and the offshore resources held by the taxpayer as of 1st September 2009 will not qualify for the scheme.

In a letter to tax advisers, HMRC stated: “The changes being made as a result of this review will make no difference to the vast majority of people who wish to participate in the LDF but will bring a greater degree of fairness to the facility and ensure that it operates as it was originally intended.”

There have been no changes to the criteria for people prevented from using the LDF, which includes taxpayers under criminal investigation; either under Code of Practice 9 investigation or you have been arrested or cautioned under the Police and Criminal Evidence Act.

In addition to clamping down on the use of the LDF, HMRC has revealed its intention to withdraw its EBT Settlement Opportunity from March 2015.

Take advantage of the Liechtenstein Disclosure Facility before it closes (it runs until April 2016). KinsellaTax have relationships with a number of Liechtenstein based banks, allowing us to support you throughout the process.

Act now and call our specialist LDF team on 0800 471 4546.

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