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Just 419 taxpayers have registered for the Liechtenstein Disclosure Facility (LDF) despite thousands being eligible to do so, according to commercial law firm and tax investigation specialists McGrigors.
 
The low response rate to the LDF follows figures published last week that only about 1,500 medical professionals had registered for a special tax amnesty out of 30,000 believed to have undisclosed tax liabilities.
 
It was hoped that more favourable terms than the New Disclosure Opportunity (NDO), notably only having to come clean about undeclared tax liabilities in offshore accounts going back 10 years compared to 20 years in the NDO, would encourage a higher takeup of the facility.

But according to data from HMRC, just 419 taxpayers registered for the LDF between 1 September 2009 and 31 March 2010. This compares to 10,000 who registered for the New Disclosure Opportunity.
 
Phil Berwick, Director of Tax Investigations at McGrigors, blamed lack of awareness for the poor response: “It is surprising how few taxpayers have registered for the LDF. Many more probably would have done so, but were unaware that they qualified, or even that the LDF existed.”

“HMRC are to be congratulated on releasing these figures, but they have not done enough to publicise the LDF. To release the information only twice a year, as they intend to do, will not encourage those who may be wavering to come forward,” Berwick added.
 
According to McGrigors, the low number of registrations for the LDF suggests that many taxpayers have paid thousands more in tax and penalties than they need to.
 
HMRC launched two tax disclosure facilities for UK taxpayers with undeclared income and capital gains in offshore bank accounts last year. The LDF is available to taxpayers with bank accounts and assets in Liechtenstein, though taxpayers with qualifying bank accounts in other offshore locations can still use the LDF by opening a Liechtenstein account.

HMRC’s New Disclosure Opportunity (NDO) offered reduced penalties to individuals and businesses with undeclared income or gains held in offshore bank accounts or investments if they made a full disclosure.
 
Under the terms of the NDO taxpayers were required to pay the tax due on income and gains on their unassessed tax liabilities including those arising onshore, as well as interest and, in most cases, a fixed 10% penalty. Under the NDO, taxpayers were required to disclose undeclared amounts going back 20 years. The last date for the submission of online disclosures was 12 March 2010.

“There has been a poor response to recent HMRC disclosure initiatives, and this is no exception. Under the LDF, Liechtenstein banks and financial intermediaries will soon be writing to their UK customers, but HMRC could take a pro-active stance to encourage taxpayers with funds in other jurisdictions to come forward.”
 
“There are many advisers who are unaware of the LDF. If advisers do not know about the facility, there is even less chance that their clients are aware. Many taxpayers could have reduced their tax, interest and penalty bill by a significant amount by using the LDF. Overall, we could be talking about millions of pounds here.”

McGrigors believes the lack of promotion of the LDF by HMRC has pushed the onus onto professional advisers to push the facility to their clients. But HMRC’s stance has created an atmosphere of rumour and misunderstanding about the LDF, and meant that some advisers are reluctant to involve their clients in that process.
 
Taxpayers with undeclared income or gains in an offshore bank account, or offshore investment vehicle, qualify for the LDF providing that offshore account, etc was not opened through a UK branch or agency. To participate in the LDF, the taxpayer needs to open a bank account in Liechtenstein.
 
The LDF, which does not close until 31 March 2015, offers more favourable disclosure terms. Under the LDF taxpayers will be required to pay tax, interest and, in most cases, a fixed 10% penalty but only need to come clean just for the period from April 1999. In addition, the LDF offers immunity from prosecution, but for tax fraud only.

But HMRC insisted that claims of failure were "balderdash". A spokesman said: “HMRC is very pleased with the number of people who have so far voluntarily registered for LDF and that the number doing so is steadily increasing. Unlike other short term disclosure opportunities, registration for LDF is available until 2015. The legislation doesn’t even take effect in Liechtenstein until 1 September so it’s ridiculous to draw conclusions at this stage. LDF is going super well, any suggestions otherwise is balderdash”.