LDF 'will raise only half its target yield'

HMRC’s expectations for their Liechtenstein disclosure facility (LDF) are too ambitious, according to a Barker Tilly tax partner George Bull, who has claimed the so-called amnesty will raise only half of what the taxman expects.

The Revenue said £1 billion in tax, interest and reduced penalties ‘is a safe and cautious estimate of what may be recovered through the LDF over the course of five years’ – but Mr Bull said the department’s prediction ‘represents an increase over the original estimates of the return HMRC could expect from the initiative and contrasts with previous disclosure opportunities, where the eventual returns fell short of expectations.

‘For example, the offshore disclosure facility [of 2007] was expected to yield £1 billion, but only realised £400 million: a 60% shortfall,’ he remarked, claiming that ‘a yield of just over £500 million is credible, based on the Government’s original expectation of 5,000 disclosures’.

Mr Bull said he believes the attractive terms of the LDF, which is set to run until March 2015, had led to a large number of disclosures from people who previously had no connection with Liechtenstein, because it restricts the number of years’ income to be disclosed to just ten, rather than the 20-year period common to tax investigations.

Authorities in the UK and Liechtenstein last week announced they had signed a second joint declaration, which warned that disclosures will not be accepted under the LDF unless the assets are ‘meaningful and of sufficient value and permanence to reflect the spirit of the [original] memorandum of understanding [between the two countries]’.

‘With the new restriction in place, HMRC may struggle to achieve their target yield,’ said Mr Bull.

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