Alastair Darling was delivering the government’s annual Budget in the House of Commons. He said the tax agreements would be similar to the one it has with Liechtenstein known as the disclosure facility.
The Liechtenstein Disclosure Facility (LDF) was set up following an agreement between the UK and Liechtenstein in August 2009. The LDF, which runs until 31 March 2015, allows people with unpaid taxes linked to investments or assets in Liechtenstein to settle their tax liability, including interest and penalties. It is estimated that, over the lifetime of the LDF, this will bring in £940 million.
It is more difficult for HM Revenue & Customs to check an offshore tax position when there is limited or no scope to exchange information. Higher penalties for non-compliance will be linked to the tax transparency of the jurisdiction in which the non-compliance arises. Where a jurisdiction agrees to share tax information automatically with the UK, these tougher penalties will not apply.
However, the LDF has not penetrated as deeply as hoped into the psyche of those holding funds abroad. Almost a fifth of UK high net worth individuals hold funds or assets overseas and of these individuals only 51% had heard of the Liechtenstein Disclosure Facility in the six months since it was launched on 1 September 2009, according to an accountancy firm.
A survey of HNWIs in the UK commissioned by BDO LLP, the world’s fifth largest accountancy firm, also found that of the 19% with funds or assets overseas, 18% of them held bank accounts or other investments in Liechtenstein.
However, just 10% of these individuals had already participated in the LDF with a further 30% planning to participate in the future. The primary reasons for this participation were inheritance tax (33%), business investment (33%) and personal investment (33%).
