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A second joint declaration has been agreed between the UK and Liechtenstein governments.
The document clarifies certain aspects of the Liechtenstein disclosure facility (LDF), and warns that individuals who move assets to the Alpine principality to take advantage of HMRC’s so-called tax amnesty must ‘reflect the spirit’ of the original memorandum of understanding (MOU) between the two countries' administrations.
The new joint declaration provides for a system of ‘retentions’ from assets in exceptional cases where the UK tax position has not been regularised but where it would not be possible for a Liechtenstein financial institution to stop acting.
The situation could include breaches of trustees’ obligations: for example, to the other beneficiaries of a trust where only one beneficiary has not complied with the certification rules.
The agreement warns that any assets moved to Liechtenstein must be ‘meaningful and of sufficient value and permanence to reflect the spirit of the MOU’.
Simon Airey of DLA Piper said the phrase refers to the requirement in the original MOU for a ‘meaningful relationship’ to be established in Liechtenstein, but the additional wording seems to be adding new requirements.
'While many institutions have already insisted upon significant and long-term investments, others have been content to accept smaller or temporary deposits in return for higher charges.
‘What about those who have already opened accounts with a small deposit to take advantage of the LDF or who have no intention of maintaining any long term investment in Liechtenstein?’ asked Mr Airey, who expects the provisions to be applied only prospectively.
The new agreement puts beyond doubt the ban on individuals who come under investigation from subsequently applying to use the LDF.
‘It had been argued that only those under investigation “as of the date of signing” of the MOU were excluded by its wording, not those who were subsequently investigated prior to applying for the LDF,’ said Mr Airey.
‘That interpretation was never accepted by HMRC. It is now as clear as it possibly can be that you must apply for the LDF before an investigation has started.’
The way I read it, if you took a suitcase full of cash which represented the proceeds of tax evasion to the Cayman Islands in July 2009 and opened an account there you can now get a favourable settlement with HMRC by opening an account of sufficient size and permanence in Leichtenstein ("in the spirit of the MOU", whatever that is) . Yet if you stuffed that cash in a mattress, you are, like the mattress, stuffed!
Offshore evasion triumphs over onshore. Nice one, Mr. Hartnett!
Puzzled, of Tunbridge Wells.