Quarterly News

What do you know about Liechtenstein?

Liechtenstein is located between Switzerland and Austria. The Liechtensteiners are descended from the Alemanni tribe and its currency is the Swiss franc. The principality of Liechtenstein was founded in 1719 and remained part of the Holy Roman Empire.

More importantly, Liechtenstein had become a 'tax haven' for those who wished to hide from tax authorities due to Liechtenstein's stringent banking secrecy laws.

HMRC have been gathering information from many banks over recent times in an attempt to track down undeclared monies. Now, Liechtenstein and the UK have signed a deal which concerns the introduction, by Liechtenstein, of a five-year taxpayer assistance and compliance program. It also concerns the introduction, by HMRC, of a five-year special disclosure facility for persons wishing to regularise their UK tax affairs.

The deal is designed to provide an incentive for persons with assets and interests in Liechtenstein to disclose previously undeclared income and gains to HMRC. This will be done by limiting the recovery of UK taxes to a defined 10-year period and providing an option for a simplified composite rate of tax in certain circumstances. Normally, HMRC would be able to consider tax, interest and penalties for up to 20 years.

The main part of the deal is that UK investors will be urged to come clean to HMRC about their tax affairs. If they do, they will be given the 'favourable' terms detailed above. If they don't, then Liechtenstein will close their accounts, although Liechtenstein will not be handing over bank details to HMRC.

HMRC consider that approximately 5,000 British investors own bank accounts in Liechtenstein and estimates of the funds on which there could be unpaid tax, could be up to £3bn, so it will be interesting to see how successful this deal is for HMRC.

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