HMRC set to miss £3bn LDF target

THE LIECHTENSTEIN DISCLOSURE FACILITY is set to fall well short of the £3bn yield initially promised by former HM Revenue & Customs permanent secretary Dave Hartnett in 2012.

With just 18 months left to run on the facility, around £833m – approximately £14.1m per month – has been generated in the five years it has existed, according to law firm Irwin Mitchell.

The LDF enables Britons to obtain a generous settlement with HMRC on any undisclosed tax liabilities held in offshore bank accounts, by rerouting funds through the tiny European principality. Originally due to end to end in March 2015, strong demand for the scheme saw it extended until 5 April 2016.

For its part, HMRC said it has collected more than £1bn.

In August, HMRC moved to restrict access to some of the favourable terms offered by the facility.

In a letter sent to advisers, HMRC said: “The changes being made as a result of this review will make no difference to the vast majority of people who wish to participate in the LDF but will bring a greater degree of fairness to the facility and ensure that it operates as it was originally intended.”

Under the full favourable terms, successful LDF applicants pay a 10% fixed penalty on the underpaid liabilities for periods to 5 April 2009. In addition, assessment is limited to accounting periods or tax years from 1 April 1999 and there is an option to choose a single composite rate of 40% rather than calculate actual liability on an annual basis.

Access to the full favourable terms will not be available to taxpayers whose offshore liabilities have not been disclosed in full to HMRC. Cases where disclosures are already subject to an intervention that began more than three months prior to the LDF application, such as those under Disclosure of Tax Avoidance Scheme (DOTAS) rules, will also be exempt from the LDF. Cases with no substantial connection between the liabilities being disclosed and the offshore asset held by the taxpayer as of 1 September 2009 will no longer qualify for the scheme.

On the latest figures, Irwin Mitchell head of contentious tax said: “You can analyse the yield figures in numerous ways, but, at this rate, HMRC are not going to reach its target of raising £3bn through the facility.

“I suspect that the eventual yield will fall woefully short of that target, and, based on figures to date, is likely to be in the region of £1.2bn. Further changes to the scheme are likely to make this figure worse rather than better.”

A spokesman for HMRC said: Our experience from previous opportunities such as the Offshore Disclosure Facility and New Disclosure Opportunity is that the majority of disclosures come forward close the end date – 5 April 2016 in the case of the LDF.

“Given the commitment of well over 40 countries to the common reporting standard for automatic exchange of information, the LDF offers the best opportunity for those with significant undeclared offshore assets to come forward.”