In the last few years, clients with undeclared assets overseas have been encouraged to make disclosure to HM Revenue & Customs through schemes such as the Liechtenstein Disclosure Facility. Under the terms of the LDF, clients will not face any criminal action, will, in most cases, face a penalty payment capped at 10% of the tax due and only have to submit liabilities from 1999 onwards.
However, once the declaration has been made and the assets become “visible” to the tax authorities, Skandia said there is a great opportunity for advisers, although according to its research only 38% of advisers were aware this opportunity existed. Furthermore, 57% said they were unsure of what the opportunity is.
“It is important that professionals advising clients on using a disclosure facility recognise this advice opportunity,” said Steve Lawless, Skandia International’s global head of banking distribution.
“Considering all options, including steps to structure the client’s assets using an offshore bond wrapper is important in creating the best possible client outcomes. The offshore bond structure is not a tool to avoid tax but offers clients greater control over the timing and nature of the tax payable. It also greatly lightens the burden of reporting on active management within such client accounts.”
Skandia, which is part of Old Mutual Wealth, explained that, once a client regularises their assets using a disclosure facility they enter “full reporting responsibilities as they would be with all their directly held assets which are unwrapped”.
The company added that, if these assets are left without further restructuring, UK resident and domiciled clients will have to report on the assets every year via their tax return and that tax will have to be paid on an arising basis making active management by an adviser “more difficult”.
However, if the assets are moved into an offshore bond wrapper, the adviser and client can gain control over the timing and nature of any events chargeable to tax, Skandia pointed out.
Earlier this year, when the UK sealed a deal with its Crown Dependencies to introduce a so-called "mini-FATCA" agreement, an Isle of Man disclosure facility was launched.
