What's new?

The Liechtenstein Disclosure Facility (LDF) ran until 31 December 2015.

A new information exchange agreement was signed between the UK and other countries inclusing Switzerland in May 2014.  

The LDF had been extended to 6 April 2016, however in the 2015 Budget it was announced that it will end on 31 December 2015.

This guide looks at the LDF and explains the objectives behind the measure, the process for those wishing to take advantage of it, and the benefits attaching to early disclosure within the LDF framework. 

At a glance

Within the framework of the LDF, UK taxpayers have the opportunity to disclose previously undeclared income and gains, derived from investments in Liechtenstein, and thereby benefit from a preferential penalty regime.

Benefits of disclosure within the LDF

  • The maximum penalty is fixed at 10% of the outstanding tax plus interest.
  • No penalty in cases of ‘innocent error’.
  • HMRC will only look back to accounting periods or tax years commencing on or after 1 April 1999 and will not seek to recover unpaid tax from earlier periods.
  • In cases of ‘innocent error’, liability to UK tax will be limited to include only the previous six tax years at the time of disclosure.
  • The taxpayer can choose whether to use a single composite rate of tax at 40% or to calculate liabilities based on an actual basis.
  • HMRC will give assurances it will not pursue criminal prosecution.
  • A single point of contact will be available at HMRC throughout the process.

Time limits

  • The LDF commenced on 1 September 2009 and runs until 31 December 2015.
  • The time limit was extended in February 2012.
  • Financial intermediaries in Liechtenstein will expect the disclosure process to be completed within 18 months of the date they notify the taxpayer, and the time-line laid down by HMRC is as follows:
    • Liechtenstein financial intermediary issues notice to taxpayer.
    • Taxpayer notifies HMRC of intention to disclose immediately.
    • HMRC issues registration certificate within 60 days.
    • Taxpayer sends certificate to financial intermediary within 30 days.
    • Taxpayer makes disclosure within either:
      • 7 months if using the single composite rate of tax.
      • 10 months if calculating liability on an actual basis.
    • HMRC issues disclosure certificate within 30 days.
    • Taxpayer sends certificate to financial intermediary within 30 days.
    • HMRC reviews and agrees disclosure.


The LDF is available to UK taxpayers with ‘relevant property’ or ‘an interest in relevant property’ held in Liechtenstein subject to the following restrictions:

  • If a person is already under investigation by HMRC they cannot participate.
  • If there has been a previous investigation by HMRC and a person did not knowingly disclose their interest, they will be able to participate however will not be able to benefit from the limited penalty provisions.
  • Any person who was contacted by HMRC under the terms of the Offshore Disclosure Facility or the New Disclosure Opportunity will be able to participate but will not benefit from the limited penalty provisions.  Any penalty will however be restricted to penalties under the New Disclosure Facility.
  • Any person who has a bank account or financial portfolio account which was opened through a UK branch or agency will be able to participate but will not, in relation to that account, be eligible for the shorter limitation period, the fixed penalty or the composite rate option.

Overview & FAQs

Introduction of the LDF follows negotiation between the governments of both the UK and Liechtenstein which has resulted in an Agreement for Tax Information Exchange between the two countries.  A Double Tax Agreement is expected to follow in due course.

The LDF follows two previous amnesties:  The Offshore Disclosure Facility (2007); and the New Disclosure Opportunity which ended on 30 November 2009.  HMRC maintains that this will be the last chance for UK taxpayers with undeclared offshore income and gains to redeem themselves while taking advantage of reduced penalty rates.  This is food for thought bearing in mind the intention – from 2011 – to ‘name and shame’ deliberate tax defaulters, together with the increased penalty rates proposed in the 2010 Budget.

The framework for the LDF is laid down in a Memorandum of Understanding (“MoU”), which should be read in conjunction with a Joint Agreement, both signed on 11 August 2009.  The LDF commenced on 1 September 2009 and the disclosure period will run until 31 March 2015.

Financial intermediaries

The process of disclosure can be started voluntarily by UK taxpayers at any time during the disclosure period.

As a result of the MoU however, financial intermediaries in Liechtenstein are now required to identify all those persons whom they believe may be subject to UK tax, and issue notification to them.  Once notification is received, the UK taxpayer has 18 months to provide one of the following: 

  • Written confirmation that they have complied with their UK tax obligations or applied to disclose already under a previous facility.
  • Evidence proving that they have met their UK tax obligations in relation to investments in Liechtenstein.
  • A certified copy of their Self Assessment tax return showing that investments have been declared.
  • Evidence that they are not a UK taxpayer.
  • Registration and disclosure certificates as provided by HMRC under the LDF.

Alternatively the UK taxpayer can authorise the intermediary to provide HMRC with all the information they hold.

If the financial intermediary does not receive the confirmations required within the 18 month period the taxpayer will be required to withdraw their investment from Liechtenstein, or in certain limited circumstances other sanctions may be applied.

Relevant property in Liechtenstein

Disclosure under the LDF is intended to result in the declaration of all relevant property in Liechtenstein, and the income and gains attaching to it. 

The MoU defines ‘relevant property’ as: 

  • A bank or financial portfolio account in Liechtenstein.
  • A company (including a corporation and an institution structured as a corporation as well as a company without legal personality), partnership, foundation, establishment, trust, trust enterprise, or other fiduciary entity, estate, or insurance policy that is issued, formed, founded, settled, incorporated, administered, or managed in Liechtenstein.

If we use a trust as an example, it will be classed as ‘relevant property’ if: 

  • It is established under Liechtenstein law, and/or,
  • It has a majority of trustees resident in Liechtenstein, and/or,
  • It is administered or managed in Liechtenstein.

It is worth noting that, from HMRC’s perspective, there is no minimum level of investment or amount of tax revenue below which the LDF does not apply.

Note that the LDF is not restricted to investments held on 1 September 2009 and as a result it would be possible for investments held offshore to be transferred to Liechtenstein and disclosed within the LDF framework.  This is likely to be attractive bearing in mind the preferential penalty rates available.

The Liechtenstein Bankers Association lists all banks in Liechtenstein, together with their contact details.  Appropriate ‘know-your-client’ procedures are employed and the banks are happy to discuss suitable products with potential clients.


Following notification by a financial intermediary in Liechtenstein, or on a voluntary basis, the taxpayer should register their intention to make a declaration with HMRC.  This is done by contacting the HMRC Liechtenstein helpdesk, in writing or by phone providing the following details:

  • Name
  • Address
  • National insurance number
  • Unique tax reference (if available)
  • Date of birth
  • A cofirmation of relevance from the financial intermediary confirming that the relevant property (see above) is invested in Liechtenstein.
  • Name, reference and contact details of your agent (if applicable).

Assuming the taxpayer is eligible to participate in the scheme, HMRC will assign a disclosure reference number and issue a registration certificate within 60 days.  The certificate must be sent to the financial intermediary in Liechtenstein.

A disclosure pack will be provided to the taxpayer by HMRC and full disclosure, together with payment of any outstanding tax, penalties and interest, must be made within 7 months of registration (where the composite rate of tax is used), or 10 months (if the actual rate of tax is used).  The disclosure will include:

  • Full name, address and date of birth.
  • Passport, birth certificate or other proof of identity.
  • National insurance or unique tax reference number.
  • Information and documentation showing eligibility to use the LDF.
  • Details of all previously undisclosed tax liabilities for each tax year since 6 April 1999 (or accounting periods since 1 April 1999).  If estimates are used then supporting documentation must be provided.
  • Statement as to whether the actual or composite rate basis is being used.
  • Tax liability calculation.
  • Declaration that the disclosure is correct and complete.
  • Contact details for any professional adviser.
  • Payment covering all tax liabilities, interest and penalties, or a proposal as to how and when payment will be made.

Providing the disclosure is complete, HMRC will issue a disclosure certificate within 30 days.  The taxpayer then fulfils their obligations by sending that certificate to the financial intermediary in Liechtenstein within 30 days.

The disclosure is not agreed until HMRC has reviewed it and reverted to the taxpayer.  The intention is for that to be completed within 6 months of submission.

HMRC has indicated a degree of flexibility regarding the time limits for disclosure because of the expectation that those taking advantage of the LDF are likely to have complex tax affairs.  In the situation where time limits are extended, HMRC will provide the taxpayer with a letter to that effect which can be provided to intermediaries in Liechtenstein.

Composite versus actual rates of tax

The taxpayer can opt to use the composite rate of tax of 40% in order to calculate the tax due on undeclared income and gains.  This therefore covers all UK taxes (inheritance tax, income tax, corporation tax, capital gains tax, stamp duty, VAT and NIC) and could result in a lower effective rate of tax than the actual basis. 

It should be noted that where the composite rate is used, no reliefs or other deductions will be allowed, although tax withheld in Liechtenstein under the EU Savings Directive will remain creditable.

Penalties and interest

Within the LDF framework, penalties will be restricted to a maximum of 10%, or to 0% in cases of ‘innocent error’.  This is very favourable when compared with a standard penalty for offshore income and gains which increased to 200% maximum from April 2011.

Interest will be charged at usual HMRC rates from the date that any outstanding tax should have been paid.

Other points

It is possible to contact HMRC on a no-names basis for a general discussion before formally notifying any intention to disclose.  Agents can also do this on a client’s behalf.

A single point of contact will deal with the taxpayer throughout the disclosure process.  This is intended to provide support to the taxpayer and also recognises the potential complexity of the tax affairs involved.

Where investments have not been disclosed because of ‘innocent error’ then no penalty will be levied.  Where ‘innocent error’ is claimed, this should be discussed with HMRC before any notification to disclose is made.

HMRC has stated that, provided there are no proceeds of crime involved (for this purpose excluding tax evasion), then they will not pursue criminal prosecutions as a result of disclosures made under the LDF.


I have undeclared offshore income and missed the last disclosure opportunity.  Can I still open an account in Liechtenstein and take part in the LDF?

Yes you can transfer the investment to Liechtenstein and then notify HMRC of your intention to disclose.  Disclosure will relate to all income/gains generated by the investment from April 1999 regardless of jurisdiction.  Note that this will not apply if there is a UK footprint attaching to the investment.

What constitutes a UK footprint in relation to my investment?

Undeclared investments in the UK clearly have a UK footprint, but the involvement of a UK branch or agency in setting up an offshore bank or financial portfolio account is also deemed to constitute a UK footprint.  HMRC has successfully requested information on the offshore accounts and assets of customers of over 300 banks in the UK and therefore it can be assumed they expect such ‘footprints’ to become evident.  If so, then HMRC will not want the favourable terms of the LDF to apply.

How do I go about setting up an offshore account in Liechtenstein?

You can contact the banks individually and discuss suitable products with them, or arrange your affairs via a financial intermediary.  The Liechtenstein Bankers Association lists all banks operating in the Principality.

How do I complete my tax return if I am aware that I have offshore investments but that I have yet to participate in the LDF?

You should notify HMRC of the offshore investments, and consider putting a realistic estimate of the potential tax liabilities on your return.  The figure can then be finalised at a later date, and interest charged/paid on under/overpaid tax.

Can I elect to have composite and actual rates of tax for different years?

No – all years for which an LDF disclosure is made will be charged on the same basis.

I inherited my father’s estate on his death in 2003 and disclose liabilities relevant to me up to 2009.  Am I obliged to disclose undeclared liabilities prior to his death?

All personal liabilities should be declared from 2003 and, based on the declaration, HMRC may seek to recover earlier liabilities from your father’s estate or executors.  Note however that if the composite rate of tax is used then all liabilities from 1999 will be included within the LDF, and no further action will be required against the estate or executors.

I have a client with an open enquiry and am concerned this may develop into an investigation of suspected serious fraud.  Can my client participate in the LDF?

If your client is eligible for participation in the LDF, they can register to do so unless they have been notified that they are now under investigation for suspected serious fraud, or they have been arrested for a criminal tax offence.


Jersey bank account
A taxpayer has undisclosed profits/gains invested in a bank account in Jersey and wants to transfer that investment to Liechtenstein in order to access the LDF.

The LDF will be available should that capital be transferred to Liechtenstein.  It is possible that the advantages of the LDF will be limited if there is a UK footprint in relation to the investment.

Undeclared UK profits
A taxpayer has undeclared UK profits and gains and is considering the acquisition of an investment in Liechtenstein in order to disclose under the LDF.

The LDF may be available however the UK footprint will mean that the shorter limitation period, the fixed penalty and the composite rate are not available.

Undeclared account opened on holiday
A taxpayer with undeclared profits/gains in a bank account in Cayman wants to open a bank account in Liechtenstein and transfer the funds.  The bank account was opened by the taxpayer in person while on holiday in Cayman.

The LDF will be available should that capital be transferred to Liechtenstein. 

Offshore bank via a UK branch I
A taxpayer has undisclosed profits/gains, arising over 20 years, in a bank account in Bermuda which was opened through a UK branch.  The taxpayer is planning to move the funds to Liechtenstein. 

Disclosure can be made on a voluntary basis, or through the LDF.  As a result of the UK footprint however the ten year limitation, the fixed penalty and the composite rate are not available.  All income and any profits/gains on the investment will therefore be assessed for all in date years but it should be remembered that the voluntary nature of any disclosure will be reflected in the penalty charged.  If disclosure is not made, the taxpayer runs the risk of an HMRC investigation.

Offshore bank via a UK branch II
A taxpayer has an account in Singapore which was opened through a UK branch or agency.  He plans to close the account and then reinvest the funds in Liechtenstein in order to benefit from the LDF.

Disclosure can be made on a voluntary basis, or through the LDF.  As a result of the UK footprint however the ten year limitation, the fixed penalty and the composite rate are not available in respect of the tax due on the investment in the prior account.  Closure of the account does not negate the fact that previous unpaid taxes have arisen in relation to an account with a UK footprint.

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