Liechtenstein Disclosure Facility Failing
Friday, March 19, 2010
Six months since its launch, the UK's Liechtenstein Disclosure Facility (LDF) can
only have had limited success, as findings from international audit, accounting
and business services firm BDO show limited participation.
The LDF emerged from an agreement between UK tax officials and Liechtenstein. Through the LDF, UK authorities aim to eliminate all UK tax evasion with a Liechtenstein connection by
March 31, 2015, but BDO's survey indicates it is unlikely to fulfil its purpose.
A recent survey of High Net Worth Individuals (HNWIs) in the UK commissioned
by BDO found that 19% of UK HNWIs hold funds or assets
overseas and of these individuals only 51% had heard of the LDF in the six months
since it was launched on September 1, 2009.
The research also found that of the 19% of those surveyed with funds or assets
overseas, 18% held bank accounts or other investments in Liechtenstein itself.
However just 10% of these individuals had already participated in the LDF with
a further 30% planning to participate in the future. The primary reasons for
this participation were Inheritance Tax (33%), business investment (33%) and
personal investment (33%).
Fiona Fernie, Partner in the Tax Investigations team at BDO, commented:
“While we have registered many clients for the LDF with HMRC (HM Revenue and Customs), we were
aware that at this stage in the programme there would be a large number of people
with assets in Liechtenstein who were either not aware of, or did not intend
to participate in, the LDF. We believe that this will change significantly once
the Liechtenstein side of the agreement becomes law and financial intermediaries
there are compelled to write to their UK resident clients to notify them of
In October 2009 it was revealed in the UK press that just 27 individuals had
registered for the LDF but until December 1, 2009, it was only available to those with bank
accounts in Liechtenstein. From December 1, 2009, anyone
with any investments or assets in any other offshore location was also able
to participate in the LDF if they move some or all of those investments into
Liechtenstein. BDO’s survey found that even with this increased access
to the benefits of the LDF, just 5% of the HNWIs that were
questioned said that they would definitely be interested in participating in
the LDF with a further 10% undecided.
“HMRC has said that it will not offer such favourable disclosure terms
as the LDF again and we strongly believe that those who have either not heard
of the LDF and its benefits or have dismissed them as not relevant should now
give serious consideration to making a disclosure under the LDF. Anyone who
rejects the carrot now could well face the stick later.”