The UK’s Crown Dependencies Disclosure Facilities and Liechtenstein Disclosure Facility (LDF) are to be closed a few months earlier than originally planned, which looks to be as early as December 2015.
The LDF allows taxpayers in the UK to disclose to HM Revenue and Customs voluntarily in exchange for immunity from prosecution and a reduced penalty in most years. Disclosures only needed to go back to April 1999, rather than the normal 20-year period. The disclosure opportunity, which has been extensively used since it became available in 2009, was due to end in April 2016.
The Crown Dependencies Disclosure Facilities were a side-effect of the introduction of the US Foreign Accounts Tax Compliance Act (FATCA). FATCA enforced banks in the Crown Dependencies (and other areas) to report any data to the IRS (the Internal Revenue Service in the US), and the UK’s tax authorities insisted on getting the corresponding data on UK residents. Simultaneously an amnesty for UK clients of Crown Dependency banks was opened and will remain so until September 2016.
However UK Treasury has stated that both schemes will be rendered void by the OECD plan for automatic international exchange of bank account data, due to begin between 2016 and 2017 which will reveal a large amount of offshore banking information.
Both schemes are, therefore, to be closed early at the end of 2015. Non-compliant taxpayers will still be encouraged to reveal their undeclared assets under a last resort disclosure system by 2017. There will however, be stricter fines (of at least 30% in addition to tax owed plus interest), without any guarantee of immunity from prosecution.
Fiona Fernie from Pinsent Masons has questioned the move of closing the available tax amnesties early and how effective removing the guarantee of immunity from prosecution will prove, as people may be deterred from disclosing if it is an imprisonable offense.