With the registration for the Liechtenstein Disclosure Facility closing on 31 December, a new ‘tougher’ offshore disclosure facility will take its place, giving tax evaders a ‘last chance’ opportunity to come clean. So what will this new facility look like?
By placing advertisements in the national press over the weekend, HMRC have launched a campaign warning those with undisclosed offshore tax liabilities that time is running out to put things right using the Liechtenstein Disclosure Facility (LDF).
Linked to the introduction of the 'Common Reporting Standard' – under which from 2017 over 90 countries will start to share tax-related information – a new ‘last chance’ but (in HMRC’s words) ‘tougher’ offshore disclosure facility will replace the LDF and Crown Dependency Disclosure Facilities in giving tax evaders a final opportunity to come clean.
To underpin the new ‘tougher’ facility, a statutory requirement is to be placed on taxpayers to come forward and correct offshore compliance issues within a defined window. Whilst a consultation is promised on the nature and level of the related sanctions, those who fail to voluntarily disclosure before the end of the window and who are investigated by HMRC are likely to be subjected to much greater financial penalties and - at the very least – be publicly named and shamed. Furthermore, with a new strict liability offence for offshore irregularities in the pipeline, they will run a real risk of criminal investigation.
Guidance on the new disclosure facility will be provided in January, with a view to an April start date. Having considered previous disclosure opportunities as too 'soft', the Public Accounts Committee will most certainly frown on any attempt to water down the new facility. We are still awaiting details, but HMRC has already let it known that the minimum penalty for those coming forward will be at least 30 per cent and, perhaps more significantly, there will be no immunity from criminal investigation. Contrast this with the more beneficial terms of the Liechtenstein Disclosure Facility (LDF), under which a 'no criminal investigation' guarantee is given, together with, in certain circumstances, a financial penalty of just 10 per cent and the writing off of additional tax liabilities arising prior to April 1999.
Time is running out for registration under the LDF, as the door closes on 31 December 2015. Accordingly, those worrying about potential offshore (and onshore) tax issues should take immediate advice about using the LDF as after that date they will no longer be able to avail themselves of the favourable terms.