Take a broader view of disclosure
PKF tax investigation and dispute resolution partner John Cassidy argues that the Liechtenstein Disclosure Facility (LDF) is more widely applicable than many advisers assume.
The Liechtenstein Disclosure Facility (LDF) that took effect from August last year – and runs until 2015 - hasn’t made it onto the radar of most advisers and their clients. Most people assume that it is only relevant to high net worth individuals who have stashed their cash with previously ultra-discreet banks in the principality.
Case 1: Cash deposits
Client deposited £1m in a Swiss account 20 years ago, earning 5% average annual interest - not declared for UK tax purposes. Tax, interest and penalties on 20 years’ accumulated interest under the New Disclosure Opportunity would have amounted to around £1.2m. On PKF's advice, client created a Liechtenstein presence andwill save over £650,000 under LDF for the individual.
But advisers who dismiss the LDF on the basis their clients do not have Liechtenstein interests are missing the point. With the government’s new determination to crackdown on avoidance the LDF, which limits the penalties to 10% in most cases for individuals who come clean, provides an opportunity for other individuals with offshore accounts to rearrange their accounts to take advantage of the amnesty.
Through more than 300 information notices served on overseas banks since last year, HMRC has accumulated a mountain of information on offshore account holders. As the crackdown takes effect, advisers who are not aware of the LDF could be missing an opportunity to reduce tax bills for those clients (see the case studies below) with offshore assets who are targeted by HMRC’s investigators.
Many practitioners will believe they don’t have any such clients – until the day the clients step forward or HMRC finds them. Given the huge and perfectly legitimate savings on offer under the LDF, practitioners need to make their clients aware of it. This is obviously delicate, but could easily be by way of a section in a newsletter or dropped into conversation.