Liechtenstein banks want tighter rein on British ‘tax tourists’

LIECHTENSTEIN BANKS want to make British ‘tax tourists’ looking to use a groundbreaking tax amnesty pay 30% of their overseas assets into a bank account in the tiny European principality, and keep the account open for at least two years.

The Liechtenstein Bankers’ Association is talking to its government about tightening the criteria for using the Liechtenstein Disclosure Facility, which has been used by more than 2000 Britons since it was set up in 2009, Accountancy Age can reveal.

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.

The LDF has been more popular than originally expected, particularly with Britons who have transferred cash from other offshore accounts into Liechtenstein, which is trying to shed its image as a tax haven. Last week, the governments extended the deal for an extra year until April 2016. HM Revenue and Customs (HMRC) has estimated that the deal could raise around £3bn for the Treasury.

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 minimum amount for using the LDF, although some banks specify their own conditions. 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.

Two Liechtenstein banking sources have told Accountancy Age that the Liechtenstein Bankers’ Association is expected to imminently ask its government to tighten the criteria for Britons who want to use the LDF.

The banks propose Britons should pay a minimum of 30% of their overseas assets into a Liechtenstein bank account and keep it open for at least two years.

Britons who have a company structure or trust in Liechtenstein will have to pay 20% of their overseas assets and also keep the account open for two years.

The details of the proposals have not been finalised.

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.

A spokesman for the Liechtenstein Bankers’ Association declined to comment on its proposals, but said there was a “strong will” among the countries’ banks to clarify the criteria for using the LDF.

“We don’t want money to flow in and out of Liechtenstein over a couple of months,” he said. He added that its banks wanted a long-term financial relationship with British customers.

Ronnie Pannu, a director at PwC, said the proposals to toughen the criteria for using the LDF may spur some Britons to use it soon.

“Some people may want to make a quick disclosure [with the LDF] and move money back to the UK,” he said. “The advantage now is there money is not automatically locked in for two years.”

For British taxpayers with overseas assets the Liechtenstein facility is usually a better option than the Swiss tax deal – which deducts a withholding tax of between 19% and 34% to settle past tax liabilities – tax advisors reckon.

An HMRC spokesman said in a statement that the investment criteria for moving funds moving to Liechtenstein was a commercial decision for Lichtenstein financial institutions.

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