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LDF closes earlier than expected

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20th Nov 2015
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UK taxpayers with financial assets overseas who owe tax have just over a month to take advantage of the Liechtenstein Disclosure Facility’s generous settlement terms before it closes earlier than originally planned on 31 December.

The facility - based on a tax agreement between the UK and the small European principality - allows Britons to settle tax liabilities on foreign bank accounts on favourable terms. Penalties on tax owed start at 10% − much lower than standard tax penalties − if taxpayers come clean about their assets.

After the LDF closes, penalties will start at 20% but there is no guarantee that HMRC will not prosecute. It applies to tax liabilities going back 20 years for anyone who held a bank account or other financial assets offshore on 1 September 2009.

The LDF, which has collected more than £1bn, was originally due to run until April 2016. It will be replaced by a worldwide tax disclosure facility.

John Cassidy, partner at Crowe Clark Whitehill, told Accounting WEB that he was in Gibraltar, “spreading the message” about the imminent closure of the LDF.

“If people have something to declare they should get in quick as the carrot is being taken away at the end of the year. They will be much better off if they register with the LDF rather than waiting.”

Pinsent Masons, a law firm, said it expected a “last-minute rush” of people registering for the LDF before it closes.

It said that about 40% of individuals, who have used the LDF had been prompted into a disclosure after enquiries into their affairs by HMRC. This suggests that HMRC already knew or suspected that they owed tax.

The LDF was originally set up for UK taxpayers to declare tax due on assets held in Liechtenstein. But it has rapidly been adopted as method of choice for UK taxpayers to declare unpaid tax due on assets they hold in the UK or globally, Pinsent Masons, said.

Pinsent Masons also said that almost one in five of those using the LDF had no overseas assets but used it to declare irregularities in their UK tax affairs.

PwC said that since the LDF began in September 2009, more than 6,000 cases have been settled with HMRC.

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