HMRC have announced a number of changes to the LDF to restrict access to the favourable terms to new tax irregularities with significant offshore connection.

The restrictions fall into three broad categories:

  • Cases where the relevant person enters the LDF to settle liabilities HMRC is already aware of
  • Cases where the issue being disclosed has already been subject to an intervention that began more than three months before the date of application
  • Cases where there is no substantial connection between the liabilities being disclosed and the offshore asset held by the relevant person on 1 September 2007.

The favourable terms of the LDF are:

  • A 10% fixed penalty on the unpaid liabilities (for periods to 5 April 2009)
  • Assessment period limited to accounting periods/tax years commencing on or after 1 April 1999, and
  • The option to choose whether to use a single composite rate (or Single Charge Rate) rather than calculate actual liability on an annual basis.

For more detailed information on the LDF see Liechtenstein Disclosure Facility.

These favourable terms are no longer available to persons falling within the restricted categories.

In the past it has been possible to open a bank account in Liechtenstein prior to an application under the LDF to take advantage of the terms of the disclosure facility in relation to undisclosed tax. The LDF will now only apply where the disclosures are substantially linked to the offshore asset, which will mean that the applications received by HMRC which relate to the disclosure of wholly or mainly onshore matters will no longer benefit.

The changes also impact on taxpayers who have entered into DOTAS arrangements. HMRC take the view that the use of a scheme by a taxpayer which has, or should have been, disclosed to HMRC, is not considered ‘new information’ and will be subject to the restrictions.

More detail in available at HMRC disclosure update.