HMRC ‘moves goalposts’ on Liechtenstein disclosures

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HMRC has tightened up the conditions under which taxpayers with offshore assets can settle their tax debts using the Liechtenstein disclosure facility (LDF).

The LDF was created in 2009 as a vehicle for people with undisclosed tax liabilities to settle with HMRC on reasonably favourable terms by moving them to the principality to take advantage of its arrangement with the UK tax department. Over the past five years, nearly 6,000 people and companies registered for the LDF and more than 5,200 made disclosures. According to HMRC, the facility has raised more than £1bn and has achieved a high level of compliance in Liechtenstein.

But in a joint statement issued this week, HMRC and the Liechtenstein government agreed to tighten up the LDF’s eligibility criteria so that people with outstanding disputes will not be able to register for the facility if they are attempting to use it to settle liabilities HMRC notified them about in the previous three months.

There is a further restriction if the assets being disclosed were not held before the facility came into force at the end of August 2009. And HMRC is also tinkering with the fixed penalty and composite rate options available for different tax years under the agreement. 

BDO tax dispute resolution partner Dawn Register commented: “The LDF was originally designed to encourage offshore tax evaders to come forward voluntarily and, to this end, it has been a huge success in terms of the amount of cash collected for the Treasury and the number of voluntary disclosures.

“The LDF was unique when it launched. The Revenue had never offered any kind of amnesty. They just never envisaged all the different permutations of how it would be used,” Register said.

She noted rising resentment from some inspectors about how it was being used. As long as they were not working on a Code 9 case, the taxpayer could switch to the LDF.

“In their view the spirit of the LDF was never intended used for things it was used for,” she said. “That was closed down by yesterday’s agreement.

“This move prevents ongoing enquiry cases benefiting from the special terms of the LDF and restricts access for people with only UK related tax problems.”

According to the CIOT’s Gary Ashford, HMRC was getting annoyed by employers using the LDF as a lower-cost routes to settle employee benefit trust disputes.

“Ultimately, this is a statement of intent by HMRC to let people know that the LDF is available but there is a necessary tightening up of who is entitled to its provisions. As we wait to hear from HMRC about their next steps on accelerated payment notices and follower notices, we see the Revenue setting out a new, tougher approach to avoidance,” Ashford said.

But Irwin Mitchell’s Phil Berwick accused HMRC of shifting the LDF goalposts, adding: “The changes will further penalise taxpayers who do not have specialist representation.

“HMRC are introducing a two-stage entry requirement before taxpayers can benefit from the full favourable terms of the process. It is remiss of HMRC to still be making amendments to the process five years after it was introduced,” he said.

BDO’s Dawn Register was not as exercised about the moving target of LDF, but agreed that the facility was becoming more complex.

“HMRC got the agreement with Liechtenstein to change it, and it is what it is. It’s been running for five years now, so it’s not like people haven’t had a chance to use it. HMRC will continue to use and flex, so it is becoming rather complex,” she said.

“As a result could have the opposite effect they are meant to, possibly discouraging, rather than encouraging, people from coming forward.”

About John Stokdyk

John Stokdyk is the global editor of AccountingWEB UK and


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