Restriction of Liechtenstein route for tax disclosure 

The UK Government has acted to restrict the situations where taxpayers can use a government agreement with Liechtenstein to get a more generous settlement from HMRC.

A joint decision between HMRC and the Government of Liechtenstein has resulted in a change to the Liechtenstein Disclosure Facility (LDF)1, a vehicle through which those with undisclosed tax liabilities may reach settlement with HMRC on pre-defined terms. HMRC believe that the facility has been increasingly abused by employers who have used Employee Benefit Trusts (EBT)2 as a means of avoiding tax and who are now attempting to settle their tax affairs under the favourable conditions of the LDF. The new agreement will now result in restricted access to some of the favourable terms offered by the facility.

Gary Ashford, who represents the CIOT on HMRC’s Compliance Reform Forum, commented:
“The LDF provided opportunities for some employers to settle tax liabilities in a way that was not intended. These new restrictions will now ensure a more level playing field. The LDF is primarily focused on those with overseas tax liabilities, mainly those with undeclared assets.

“These changes now mean that taxpayers who reported under the Disclosure of Tax Avoidance Scheme (DOTAS) rules, or any situations where HMRC have been making enquiries for more than three months, will be unable to take advantage of the LDF. This means that users of many UK tax avoidance schemes who wish to settle their tax affairs will not be able to use this route.

“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.”

 

Source: tax

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