Liechtenstein Disclosure Facility (LDF)

The LDF is a special agreement with the government of Lichtenstein. 

It is separate from the NDO, and is very different.   The facility runs for several years.  You can register under the facility from 1 September 2009 onwards, but financial intermediaries in Liechtenstein have until 31 March 2015 to notify clients that they are potentially affected. Clients then have a further 18 months to ensure that they have registered with HMRC and filed the necessary report. 

So it can be seen that, unlike the NDO, there is no need for hasty action.  Clients and professional advisors should use the available time to take specialist advice before committing to action.

However, it would not be wise to delay indefinitely because you will not be able to obtain the benefits of the LDF if you are under investigation by HMRC for suspected serious tax fraud, or have been arrested for a criminal tax offence.  If you are worried that the scale of your tax problem might bring within either of these categories you need to act quickly to secure your position under LDF, which brings with it the guarantee of non prosecution. Call us on 0845 643 5450 if you are worried about this.

Key differences between NDO and LDF

Apart from the timescale, the other key differences are:

• Recovery of unpaid tax only extends back to 6 April 1999, ie 10 years, rather than the 20 years of the NDO.
• The LDF includes a no prosecution guarantee, so long as the funds are not connected with wider (ie non-tax related) criminal activity.
• There is an optional 40% composite rate of tax to cover all duties, whereas under NDO all taxes have to be calculated separately.  This could represent a major saving.
• There are no set disclosure forms.  Individual disclosure reports must be submitted.

For a pdf download of HMRC’s Liechtenstein Disclosure Facility (LDF) Frequently asked Questions click here.

The evolving nature of the LDF

The LDF is a very different process from the NDO, and is geared towards bespoke reporting. Furthermore, it is apparent that the precise meaning of the terms of the LDF is an evolving process.  We are in regular contact with the experts at HMRC and with our fellow leading experts on LDF and the landscape is changing from week to week.  This is because the LDF is based on a Memorandum of Understanding (‘MOU’) between the UK and Liechtenstein authorities.  The MOU deals with the main issues, but lacks the depth of detail that would be found in equivalent tax legislation, so there are therefore more issues which are open to interpretation.

The biggest and most fundamental are the issues concerning taxpayers moving assets into Liechtenstein in order to come within LDF, and the extent to which LDF can be extended to cover UK based irregularities.  HMRC have already clarified their Frequently Asked Questions in regard to funds transferred to Liechtenstein, and we understand that further clarification will be issued shortly regarding the circumstances and extent to which UK liabilities can be brought within LDF by taxpayers who did not have Liechtenstein assets at the date of signature of the MOU.

The two main lessons from this are:

1. It is possible to obtain the benefits of the LDF retrospectively by acquiring a relevant asset in Liechtenstein, but
2. The process is fraught with complexities and potential pitfalls, so expert advice is essential for anybody considering this route.

However, the potential benefits of the LDF compared to the NDO for taxpayers with irregularities prior to April 1999 are very attractive, so if you have tax liabilities going back more than 10 years you should definitely explore your options.

Call us on 0845 643 5450 for a confidential no obligation discussion if you think you may be affected.