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CIOT predicts level playing field for access to alpine tax agreement
The government has announced restrictions to the Liechtenstein disclosure facility (LDF), in an effort to stymie misuse of the long-running tax ‘amnesty’.
The clampdown on access follows fears that firms that had set up employee benefit trusts with the intent of avoiding tax were using the LDF to settle their affairs with HMRC without risk of severe sanctions.
The category of people who cannot enter the alpine disclosure opportunity will not change, but terms that can lead to a reduction to tax paid will be restricted in circumstances where:
- no new information has been offered;
- an issue is already subject to an intervention that began more than three months before the LDF application; and
- there is no substantial connection between the liabilities being disclosed and the offshore asset held by the taxpayer on 1 September 2009.
The new limitations will ensure a level playing field, claimed the Gary Ashford of the Chartered Institute of Taxation (CIOT).
“The LDF is primarily focused on those with overseas tax liabilities, mainly undeclared assets. The changes mean taxpayers who reported under the disclosure of tax avoidance scheme rules, or any situations where the Revenue has been making enquiries for more than three months, will be unable to take advantage of the LDF. So, users of many UK tax avoidance schemes who wish to settle their tax affairs will not be able to use this route,” said Ashford, who represents the CIOT on the tax department’s compliance reform forum.
“Ultimately, this is a statement of intent by the Revenue to let people know the LDF is available but there is a necessary tightening up of who is entitled to its provisions.”
Phil Berwick, head of contentious at Irwin Mitchell, believes the stricter disclosure opportunity represents “yet another shift of the goalposts by HMRC” and will “penalise taxpayers who do not have specialist representation”.
He said, “It is remiss of the Revenue to be making amendments to the LDF process five years after it was introduced. With less than two years before the facility ends, further reviews or changes by HMRC cannot be ruled out.
“Preventing taxpayers who are more than three months into an enquiry from getting the full favourable terms is not helpful. They may have an accountant who is unfamiliar with the LDF, or they may not be aware they have a problem. It is not clear whether the taxman will be writing to every taxpayer under enquiry – or who now becomes subject to an enquiry – to explain they may be able to use the LDF.”
