Bid to clear air over 'amnesty' for undeclared foreign assets

Earlier this year HM Revenue & Customs and the tax haven of Liechtenstein agreed an innovative deal that allows tax dodgers to come clean and avoid prosecution.

This week's seminar, the first to take place in Yorkshire, aims to dispel some of the myths associated with the Liechtenstein Disclosure Facility (LDF).

This allows people with undeclared assets anywhere outside the UK to come clean, as long as they open an account in Liechtenstein. They will then be given a fixed penalty plus a backdated tax bill and a guarantee they won't be prosecuted.

This means that anyone with assets hidden in popular tax havens such as Switzerland, Jersey, Guernsey, Gibraltar or Monaco can take advantage of the Revenue amnesty.

As a rule of thumb, the Revenue will apply a 40 per cent tax charge to assets going back to 1999 and impose a 10 per cent penalty.

All tax gains from before 1999 are disregarded by the Revenue. As a rough guide, people will be left with two thirds to three quarters of the money they had in the bank.

This contrasts with tough new laws whereby tax evaders caught by the Revenue can face penalties of up to 200 per cent.

The problem with the LDF scheme is that it has been widely misunderstood. "The link with Liechtenstein has been confusing," said DLA Piper partner Simon Airey. "People have believed you have to have a secret account in Liechtenstein, or transfer all your money there. That's simply not true.

"You just have to transfer funds to Liechtenstein or make an investment there before 2015 – providing the Revenue doesn't catch you first."

Mr Airey described the issue as a "ticking time bomb".

"Theoretically people have until 2015 to take advantage of the LDF, but the Revenue is closing in."

Mr Airey said that for some people, the illicit money was causing such anxiety that they could not sleep at night. In many cases this was money bequeathed to them in secret accounts set up by their parents.

In some cases this was money whisked out of the UK years ago, when taxes were much higher and it was considered socially acceptable to dodge taxes.

But now the issue has come full circle, with tax dodgers being seen as unacceptable in today's difficult economic climate.

Mr Airey said the LDF was a once-in-a lifetime chance to avoid prosecution as the Revenue geared up to "name and shame" UK tax evaders.

Given the wealth and industry of Yorkshire, it is estimated there are thousands of tax evaders in the region.

The purpose of the October 14 briefing is to explain to advisers, bankers and clients how the LDF works. "It's the ABC of the LDF," said Mr Airey. "You might say why would bankers be interested? It will mean a loss for them if they advise clients to take money out. But we're saying you can preserve most of the money."

The other myth DLA Piper is keen to explode is that the LDF is a trap. "The Revenue has neither the incentive nor the resources to trap people. They just want the cold hard cash," said Mr Airey.

Some of the scepticism stems from the generous terms being offered by the Revenue. But experts believe it would cost the Revenue so much money to track down tax dodgers on its own that it would prefer to get

a percentage of the money

back.

The Leeds meeting takes place less than a week before the Government's spending review, which is expected to hit everyone in Britain with the introduction of benefit cutbacks and public sector spending cuts.

"This is a good time to promote the LDF," said Mr Airey. "Rich people should be paying taxes in tough economic times.

"This is a big priority for the new Government. The coalition is keen to chase down wealthy people who are avoiding paying their taxes."

Anyone interested in taking part in the 8.30am DLA breakfast briefing should call DLA on 020 7153 7541. The event takes place at DLA Piper, Princes Exchange, Princes Square, Leeds LS1 4BY.