The New Disclosure Opportunity (NDO) scheme, first announced in last April’s budget and aimed at those with undisclosed assets and income held offshore, is due to commence on September 1, as is the more recently announced Liechtenstein Disclosure Facility (LDF) - aimed specifically at those with accounts in Liechtenstein as part of a tax agreement between the UK and the alpine jurisdiction. However, PKF is concerned that the LDF’s more generous terms leaves those intending to file under the NDO at an unfair disadvantage and is urging HMRC to level the playing field.

“The announcement of the Liechtenstein amnesty threw open many questions about the disparity of its terms with that of the previously announced NDO,” said John Cassidy, Tax Investigations partner at PKF.

“Indeed, whilst the notes to editors at the bottom of HMRC’s Liechtenstein announcement state that the investments have to be in Liechtenstein on 1 August 2009 for the investors to qualify for the amnesty from 1 September, they also state clearly that if the investments are moved into Liechtenstein after that date, the investor can still participate in the Liechtenstein amnesty from 1 December. This clearly gives the green light for all offshore investors to use the more favourable Liechtenstein terms, if they move their money between now and 1 December 2009," Cassidy added.

“I urge HMRC to both issue some clear guidance laying out exactly what investors can and cannot do and align the terms of the NDO with the Liechtenstein amnesty as this is more likely to encourage investors to use the facility leading to a bigger tax take for HMRC,” he said.

The LDF agreement, signed by the two governments on August 11 alongside a broader Tax and Information Exchange Agreement, will allow penalties on unpaid tax to be capped at 10% of tax evaded over the last 10 years, providing that the account holder makes a full disclosure to HMRC before March 31, 2015. The NDO, the notification period for which closes after November 30, 2009, also caps penalties at 10% in most cases, but has a recovery period going back 20 years. Taxpayers disclosing under the LDF can also elect to apply a special composite rate of 40% to cover all taxes on an annual basis without the benefit of any relief or deduction.

However, according to the Memorandum of Understanding establishing the LDF, where a person has an investment opened through a UK branch or agency, they will not benefit from the terms of the LDF.

The preamble to the MoU states: “A person who participates in the disclosure facility and has a bank account, including a financial (portfolio) account, outside the UK or Liechtenstein which is in his name and was opened through a UK branch or agency of that bank, will not, in relation to that account, be eligible for the shorter limitation period, the fixed penalty and the composite rate option provided under the disclosure facility and as referred to in paragraphs 5 and 6 of Schedule 7.”

The LDF is available to all persons with new or existing fiduciary, company or other holding structures or financial accounts in Liechtenstein during the five-year period, subject to the following provisions:

• Any person already under investigation by HMRC as of the date of signing of this MOU cannot participate in the disclosure facility;
• Any person who was previously under investigation by HMRC and who knowingly did not disclose his interest in any relevant property will be able to participate in the disclosure facility but will not be able to benefit from the limited penalty provided for in the disclosure facility;
• Any person previously contacted by HMRC under the terms of the Offshore Disclosure Facility or the New Disclosure Opportunity will be able to participate in the disclosure facility but will not be able to benefit from the limited penalty provided for in the disclosure facility. The relevant penalty will not, however, be higher than the penalty provided for under the New Disclosure Opportunity.