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The UK has extended its Liechtenstein Disclosure Facility tax scheme, whereby taxpayers with undeclared offshore assets in Liechtenstein institutions may reveal them to the Revenue in return for reduced penalties, by just over a year.

The LDF had been set to end at the end of March 2015, but now will run to April 2016, the Government said yesterday.

At the same time, it reported that some 2,000 people with UK tax obligations have thus far come forward under the LDF scheme, which was launched in 2009 as part of an unusual deal with the Liechtenstein government that transformed the formerly secretive Alpine principality into an ally of Britain’s tax authorities.

Under the scheme, taxpayers may enjoy reduced fines on their undeclared offshore assets when they strike a deal to disclose them, even though only a portion of them are actually sitting in Liechtenstein -- and may even not have sat there for very long.

Also announced yesterday was the initialling of a double taxation agreement between the UK and Liechtenstein, which had been expected. Liechtenstein has, until now, been the only European Economic Area member without a DTA with the UK.

In announcing the extension of the LDF, the government sought to call attention to it, as well as to the penalties that await an estimated 3,000 Britons with accounts in Liechtenstein who, it believes, still do not have their affairs in order. Such individuals face potential fines totalling twice their unpaid tax, as well as owing back taxes and interest, over the past 10 years.

Exchequer Secretary David Gauke said the UK Government was “committed to ensuring that offshore income is properly taxed”, and added:  “Today’s agreement takes that commitment forward by providing greater transparency, and certainty to the taxpayers of both our countries, about how their incomes and gains will be taxed.”

'Sensible move'

Tax experts welcomed the LDF’s extension.

John Cassidy, tax investigation and dispute resolution partner at PKF (UK), an British arm of the global accountancy firm which has been helping individuals with their LDF declarations, said the addition of an extra year was “a sensible move by the Government that will be welcomed by advisers and their clients”.

Cassidy noted that the LDF initially “got off to a very slow start because individuals were reluctant to commit themselves to any specific amnesty before the Treasury finalised the details of its tax treaty with Switzerland”. Now that a UK/Swiss deal has been agreed, however, many Britons with undeclared offshore assets feel they may at last “make an informed decision about the best way forward”, Cassidy explained, with the result, he said, that the LDF is finally starting to take off.

“The deadline extension gives those affected an opportunity to catch up and use the LDF which, for the majority of individuals, is a better option than the Swiss agreement,” he added.

To read the Government’s statement, click here. To read more about the Liechtenstein Disclosure Facility, got to www.hmrc.gov.uk/disclosure/liechtenstein-disclosure.htm