The Liechtenstein Disclosure Facility (LDF), HMRC's ground-breaking deal with the government of Liechtenstein, offers a time-limited opportunity allowing those with unpaid tax linked to investments or assets in Liechtenstein to settle their tax liability with the UK. HMRC's figures show that, as at September 30, 2011, a total of 1,721 people have come forward to participate in the scheme.

A number of improvements to the Memorandum of Understanding have now been agreed which will reform key elements of the agreement. New “Confirmation of Relevance” rules are to be introduced to simplify the LDF registration process. At present, one of the conditions for using the LDF to disclose unpaid tax is that qualifying assets must be owned or acquired in Liechtenstein.

Under the new rules, from December 1, 2011, UK taxpayers will need to provide HMRC with a simple Confirmation of Relevance (COR) to register. The COR will be issued by the relevant Liechtenstein financial intermediary as proof that their UK clients have acquired a qualifying asset or established a connection with Liechtenstein’s financial centre. HMRC believes this will streamline the registration process, providing certainty as to what is needed.

In addition, HMRC and Liechtenstein have agreed to a three month extension of the notification deadline to March 31, 2012, which is attributed to the complex steps in ensuring all UK residents affected are identified and because of the larger than anticipated number of people likely to receive a letter on the matter.

Katja Gey, Director of the Office of International Affairs, who led the work on the implementation of the MoU for the government of Liechtenstein said: “While virtually all of Liechtenstein’s financial intermediaries have completed their work in identifying those whose connections with the UK will result in their notification, this three month extension for formal notification will permit our intermediaries to establish the relevant beneficial interests and ensure that the entire process reflects the sympathetic and helpful approach HMRC and Liechtenstein are committed to.”

Lastly, HMRC and Liechtenstein, working closely with the Trustee and Bankers Associations, have agreed a process which will enable some UK residents who are notified under the LDF to self-certify in certain circumstances. It is hoped this will reduce costs and simplify the process, but is only available to those investors who can demonstrate they are tax compliant. HMRC will issue a Frequently asked Questions and Answers publication in the near future, to clarify the procedure.

Andy Cole, head of HMRC’s negotiating team, concluded: “Liechtenstein and HMRC are both committed to ensuring UK taxpayers with undisclosed assets are meeting their obligations to the Liechtenstein financial centres and to us, and crucially, that UK taxpayers who need to regularise their taxes are brought back into the tax system. The developments we have announced today will help to deliver on these commitments.”