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July 23, 2010 5:12 pm
Thousands of UK taxpayers with accounts in Liechtenstein face having their bank accounts closed, and heavy fines imposed, if they continue to flout UK tax law.
Over the next few weeks, banks in the Alpine principality will be sending out letters to UK taxpayers with undeclared income in their accounts, asking them either to demonstrate that they are UK tax compliant, or to make a disclosure under the Liechtenstein Disclosure Facility (LDF) – the tax amnesty set up by HM Revenue & Customs (HMRC).
The LDF, which runs until March 2015, allows individuals to declare unpaid tax going back 10 years and pay penalties of just 10 per cent of tax owed. It therefore provides an opportunity for individuals with undisclosed offshore assets to move money to Liechtenstein and take advantage of relatively lenient penalties.
“This is the endgame for taxpayers wtih undeclared income in offshore accounts,” said Jason Collins, partner in the tax investigations team at law firm McGrigors.
“These letters are likely to trigger a flood of disclosures from taxpayers with accounts in Liechtenstein who have been waiting to see if their Liechtenstein bank has identified them.”
Until now, the measures put in place to encourage individuals to come forward have not been successful.
According to data obtained by McGrigors under the Freedom of information Act, just 175 out of around 10,000 taxpayers who notified HMRC of their intention to make a disclosure under the New Disclosure Opportunity – an earlier tax amnesty that has now closed – have made a disclosure under LDF.
But McGrigors says that this failure to make disclosures under the LDF is likely to result in thousands of people having to pay much more in tax and penalties.
Taxpayers with undeclared income or gains in an offshore bank account, or offshore investment vehicle, qualify for the LDF provided their offshore account was opened through a UK branch or agency.
To participate in the LDF, taxpayers need to open a bank account in Liechtenstein.
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