HM Revenue and Customs
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Historic Tax Agreements with Liechtenstein
Two ground breaking tax agreements between the Government of Liechtenstein and the UK signed today will result in off shore investments in Liechtenstein made by UK residents being properly taxed and represent the commitment of Liechtenstein to increased tax transparency.
A new Tax Information Exchange Agreement (TIEA) will enable the UK and Liechtenstein to exchange information to ensure the right tax is paid in each country in future.
A tax disclosure programme will clear up the tax arrears of UK residents with investments in Liechtenstein and put things right for the future. It will allow penalties on unpaid tax to be capped at 10% of tax evaded over the last ten years providing the taxpayer tells HM Revenue & Customs (HMRC) everything. Those who fail to make a full disclosure by the end of the programme will find their accounts in Liechtenstein closed down.
Together the TIEA and the disclosure programme provide a unique structure designed to tackle past and future tax liabilities for UK clients of Liechtenstein financial services.
Rt Hon Stephen Timms MP, Financial Secretary to the Treasury, welcomed the agreements:
“Today’s agreements are very good news for honest taxpayers and investors everywhere. And they represent a big step forward for tax transparency.
I am grateful to the Government of Liechtenstein for their goodwill, determination and professionalism to find an effective way forward in a difficult and complex area.
HMRC and Liechtenstein Government officials have worked extremely hard to arrive at these ground breaking agreements which mean that investors can in future take advantage of the skills and experience of Liechtenstein’s investment and banking services.”
Dave Hartnett, HMRC Permanent Secretary for Tax said:
“Those who have been evading UK tax on assets held in Liechtenstein banks must now settle with us. There are no alternatives.
To resolve this as quickly as possible we will cap penalties on unpaid tax for those coming forward to make a full disclosure. Those who make the mistake of ignoring the Liechtenstein Disclosure Facility will have their accounts in Liechtenstein closed and face penalties of up to 100% when HMRC catches up with them.”
Notes to Editors
1. The Liechtenstein Disclosure Facility (LDF) runs from 1 September 2009 to 31 March 2015.
2. All Liechtenstein financial intermediaries will have to review all clients identifying those who need to confirm their tax position with HMRC and advise them to do so within a specific time frame.
3. Where a UK investor confirms to the intermediary that they are cooperating with HMRC the financial intermediary can continue to provide financial services to that person.
4. Where a UK investor cannot confirm that they are cooperating with HMRC the financial intermediary must withdraw financial services in Liechtenstein or apply various sanctions.
5. The Liechtenstein Government will introduce new laws to ensure audit of the process.
6. To take part in the programme, investments must either be held in Liechtenstein on 1 August 2009, in which case the person can participate from the start of the facility on 1 September, or, if the investments or assets are moved into Liechtenstein after that date the person can participate from 1 December 2009, at the end of the registration period for the New Disclosure Opportunity.
7. The penalty on unpaid tax will be limited to 10% in most cases on the same basis as the New Disclosure Opportunity operated by HMRC.
8. The recovery of earlier years’ tax lost will be restricted to a maximum of 10 years up to 5 April 2009.
9. The taxpayer can elect to apply a special Composite Rate of 40% to cover all taxes on an annual basis without the benefit of any relief or deduction.
10. Both HMRC and the Liechtenstein authorities expect that by the end of the facility all UK taxpayers holding assets and investments in Liechtenstein will be meeting all their UK tax liabilities.
11. The TIEA was signed by the Rt Hon Stephen Timms MP, the Financial Secretary to the Treasury, and Liechtenstein Prime Minister, Dr. Klaus Tschütscher.
12. The text will in due course be laid as a Schedule to a draft Order in Council for consideration by the House of Commons. It will then also be available from the Stationery Office. The TIEA will enter into force as soon as both governments have completed the legislative procedures needed to give it effect.
13. The Memorandum of Understanding (MoU) setting out the details of the Disclosure Programme was signed by Liechtenstein Prime Minister, Dr. Klaus Tschütscher and Dave Hartnett CB, Permanent Secretary for Tax in HMRC.
14. A joint Declaration was signed by HSH Ambassador Prince Nikolaus von und zu Lichtenstein and Dave Hartnett CB, Permanent Secretary for Tax in HMRC.
Full details of the disclosure facility and the text of the TIEA are available from the HMRC website and on www.liechtenstein.li
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