Liechtenstein remains best option, say advisors

THE LIECHTENSTEIN DISCLOSURE FACILITY (LDF) remains a better choice for taxpayers with overseas assets despite the historic agreement between the UK and Switzerland, advisors have said.

The government yesterday announced a deal with Switzerland that will impose an initial levy on UK taxpayers of between 19% and 34% of the value of the Swiss account if they want to maintain their secrecy. Taxpayers will be allowed to disclose their account details, in which case HM Revenue & Customs will pursue previous tax liabilities owed plus interest and penalties.

The agreement has been trailed since late 2010 and it has been thought that taxpayers with offshore accounts have been waiting for the terms of the deal before committing to the LDF. The Liechtenstein facility allows taxpayers to disclose their previous liabilities with an immunity from prosecution and a 10% fixed penalty rate.

Advisors have said that the LDF remains the better option for individuals with offshore accounts. PWC conducted an analysis of how Swiss account holders would fare by moving their money to Liechtenstein.

Stephen Camm, tax partner at PwC, said: “We conclude that the Lichtenstein Disclosure Facility (LDF) is a better deal for UK taxpayers coming clean than the UK-Swiss treaty is likely to be, although taxpayers have to give up secrecy under LDF, which they are not required to do under the UK-Swiss deal. Our sample shows total liabilities under LDF are, on average, around 10% of overseas account balances in 2009-10. Those with assets in Switzerland will find their assets taxed at either 19% or 34% depending on how long the bank account has been in operation.”

Frank Strachan, head of tax at Lass Salt Garvin, said that the signing of the agreement was a “watershed moment” in efforts to tackle offshore evasion.

HMRC will perceive the signing of the UK-Swiss agreement as a keystone in their efforts to tackle offshore tax evasion. “Switzerland was the holy grail for HMRC,” Garvin said. “As for the terms, while we wait for the full ratification, it reaffirms my long-held belief that the LDF provides the simplest and most cost-effective route to regularise past tax histories.

“I’m pleased to see that the LDF terms have remained unaltered and those holding Swiss assets still have the ability to use the LDF. I expect to see a flood of LDF applications over the coming weeks. Many people have sensibly waited to see the Swiss terms; now we know them, the LDF remains the best option.”

Gary Ashford, head of tax investigations at RSM Tenon, said: “Uncertainty over the Swiss deal, and whether it might include a generous disclosure facility, has led to delays in the Liechtenstein process as account holders waited to see whether the Swiss deal offered an alternative. With no announcement yet of any extension to the process, banks and account holders alike will need to get their skates on to ensure they are fully compliant by the deadline.”

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