Is it too late to disclose Swiss tax liability?

My elderly father has a bank account in Switzerland after years of working there and I am worried that he is ignoring the possible penalties this could incur under recent tax evasion measures. I am in need of advice about how to resolve this situation - can he disclose it to HMRC without severe consequences?

John Cassidy, tax investigations partner at Crowe Clark Whitehill says that as you might have seen from the recent furore over Swiss banking and tax evasion, HM Revenue & Customs (HMRC) has already received a huge amount of data about UK residents with Swiss bank accounts under a tax agreement with Switzerland. It may be, therefore, that your father is already on HMRC's radar. If not, the recent media coverage is spurring the taxman into action and will no doubt increase the likelihood of severe measures - including criminal prosecutions - against selected individuals.

New proposals were also announced by HMRC the day after the 2015 Budget, including a "strict liability" rule where your father could be deemed to have committed a criminal offence without the Crown needing to prove that he deliberately set out to conceal offshore income that is taxable. On top of that, HMRC also announced plans for far harsher penalties based on a percentage of the total balance held in the account, rather than a percentage of only the tax arising.

However, if you act quickly you can still make use of the agreement between the UK and Liechtenstein - the Liechtenstein Disclosure Facility, or LDF - which caters perfectly for these circumstances. Despite having no past connection to Liechtenstein, if you now create a presence there (such as a bank account) you can use the LDF to square matters with HMRC once and for all. The LDF is complicated but, in a nutshell, once you are registered to use it there is a guarantee of no prosecution for past tax misdemeanours, intentional or otherwise. There is also a unique element in the LDF, not available in any other disclosure facility, known as the composite rate option which can be very beneficial in certain circumstances.

Your question also infers that the account has been open for many years. Under normal tax rules, HMRC can go back up to 20 years and levy tax, interest and penalties accordingly. Given the much higher interest rates 20 years ago, the interest for the first few years may well be more than the tax. Under the LDF, HMRC can only go back to 1999, with no tax charged on anything before then. The penalty is also relatively low, being 10 per cent to 20 per cent of the tax liabilities for most of the period in question, which is much less than would be otherwise expected.

The LDF is also far less stressful than an HMRC investigation, as most of the investigation work is undertaken for you and presented to HMRC by a tax adviser. HMRC takes a back seat during that time.

In the 2015 Budget it was announced that the LDF will close at the end of 2015, which is earlier than originally stated. It will not be replaced by anything as beneficial, so the main message is that you should act now before being challenged by HMRC. An experienced tax investigations practitioner will be able to guide you smoothly through the LDF process.

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