TAX ADVISORS are likely to herd more of their British clients towards Liechtenstein after it emerged that banks in the Alpine principality want to tighten the criteria for using the groundbreaking tax amnesty.
Last week, Accountancy Age reported that the Liechtenstein Bankers’ Association wants to make wealthy Britons pay 30% of their overseas assets into a bank in Liechtenstein – and keep the account open for at least two years – in order to use the popular Liechtenstein Disclosure Facility (LDF).
More than 2,000 Britons have used the LDF since it was set up in 2009 – often transferring cash hidden in other offshore accounts.
In return for coming clean about their finances Britons receive lenient treatment. Account holders pay a penalty of only 10% on unpaid tax on their assets, with their liability limited to the tax years after April 1 1999. This is far less than the usual 20-year period for most tax evaders.
Currently, Britons only have to show a “meaningful” connection with Liechtenstein in order to open a bank account there and use the LDF.
There is no standard definition of what constitutes a meaningful financial relationship, although some banks specify a minimum deposit.
Financial intermediaries, usually private banks but also trustee businesses, issue a “confirmation of relevance” to British customers, who have to show the form to HMRC to register with the LDF.
Liechtenstein’s banks want to stop British investors opening bank accounts in the country, depositing a small proportion of their assets, and closing the account three or four months later after settling their tax liabilities with the UK taxman.
Paul Harrison, partner in tax settlements and investigations at KPMG, said the proposed changes proposed to the LDF, which would have to be agreed by the Liechtenstein government, were significant and could encourage Britons to register quickly with the scheme.
The minimum deposit Liechtenstein banks ask Britons for in return for providing a certificate to enable them to use the LDF had increased significantly over the past six months to an average of between £50,000 and £100,000, said Emma Hendron, tax manager at Saffery Champness.
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