Today marks 50 days until the end of the Liechtenstein Disclosure Facility (LDF). Back in March 2015 the Chancellor, George Osborne, announced in his Budget that the LDF would now be closing on 31 December 2015, rather than in April 2016.
The LDF currently gives taxpayers with ‘relevant property’ the opportunity to disclose historic offshore tax liabilities under favourable terms. Currently the LDF offers immunity from criminal prosecution and a much reduced penalty regime. There is still time for individuals to structure their affairs in order to avail themselves of the advantageous terms of the LDF.
From the beginning of January 2016 HMRC will be introducing a revised disclosure facility, which is expected to be a much tougher ‘last chance’ for taxpayers to disclose offshore liabilities. The facility will be offered until mid-2017, until the introduction of the Common Reporting Standard (CRS), which may negate the need for HMRC to offer such disclosure facilities as they will have vast swathes of data relating to non-UK structures at their disposal.
The new facility will introduce harsher penalties of at least 30% of the tax owed which is in line with HMRC’s current civil penalty regime, and will most worryingly of all, offer no immunity from criminal prosecution.
After this disclosure facility has come to an end, liabilities from settlements with HMRC are set to jump startlingly. HMRC is already risk reviewing certain high-net-worth and ultra-high-net-worth individuals and looking at who to target once the opportunity to disclose has come to an end. In HMRC’s view if an individual has not taken advantage of the favourable disclosure facilities that have been offered up by HMRC in the past, then ‘the gloves are off’ and much higher settlements and public ‘naming and shaming’ can be expected.
The publication of the Public Accounts Committee’s (PAC) sixth report of session 2015-16 on 4 November 2015 identified that they are ‘extremely concerned’ with HMRC’s low level of criminal prosecutions in relation to offshore tax evasion. It is our thought that the scathing comments made by the PAC will spur HMRC into action, targeting wealthy taxpayers and their non-UK wealth structures.
Trusts will also come under scrutiny from HMRC and they may be looking at areas such as unpaid ten year charges for trusts, undisclosed distributions to UK-resident beneficiaries as well as unreported offshore funds. The residence and domicile position of the settlor of the trust may also be examined closely by HMRC.
It is therefore of the upmost importance for taxpayers who may have skeletons in the closet to seriously consider the favourable terms of the LDF to get their affairs in order before it is too late. The LDF is coming to an end on New Year’s Eve, therefore now is the time to seek professional advice.
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