Guidance

Disclosure facility investigation factsheet

Updated 3 May 2016

This information sets out the circumstances where HM Revenue and Customs (HMRC) will carry out our own investigation to be certain that a disclosure sent under this facility is complete.

It’s for guidance only and supplements the information contained in:

• LDF1 Liechtenstein Disclosure Facility: making a disclosure
• Disclosure facility detailed guidance

The terminology used has the same meaning given to it as Schedules 1 and 2 of the Liechtenstein Memorandum of Understanding and Article 4 of the Tax Information Exchange Agreement.

See the detailed guidance for more information.

What is the Liechtenstein Disclosure Facility (LDF)

The LDF is a voluntary disclosure initiative.

We have agreed that an eligible person who complies with their obligations under the LDF is given an assurance against criminal tax investigation. They may also be eligible for the favourable terms relating to the limited assessing period and fixed penalty charge.

What is the assurance against criminal tax investigation

We have agreed that an eligible person who makes a full, accurate and unprompted disclosure to us under the LDF will not be subject to criminal investigation by us for a tax-related offence. This assurance will not apply where the source of the funds from which the relevant person has benefited or may benefit constitutes ‘criminal property’ as defined by the Proceeds of Crime Act 2002.

Will HMRC accept my disclosure

We expect everyone who registers for the LDF to make a full, accurate and unprompted disclosure within the defined time limits. We risk assess all disclosures to protect those who have complied with their obligations and the integrity of the LDF.

We expect to accept the vast majority of disclosures and where this is the case, we will issue a letter of acceptance as soon as possible.

If we cannot accept a disclosure which is invalid because of an error (such as no signature, or no disclosure declaration) we will ask you to correct it. We may also ask for clarification, more information or appropriate evidence to be satisfied that the disclosure submitted is complete.

Exceptionally we will carry out our own investigation in certain circumstances including where:

• we do not receive a disclosure
• cooperation is withdrawn
• we have an alternative view on the tax treatment of your disclosure
• we suspect a partial or incomplete disclosure
• we suspect a false disclosure

When will HMRC investigate

When you do not make a disclosure within agreed time limits or withdraw cooperation

The LDF has defined time limits within which to make a disclosure. An eligible person may ask us to agree an extension if they are experiencing difficulty in submitting a disclosure on time. If the disclosure has not been submitted within the defined time limit (or by the end of an agreed extension period), we will start an investigation to work out the correct amount of tax due.

Where no disclosure is made, or cooperation is withdrawn, an otherwise eligible person will not qualify for the terms of the LDF, including the criminal investigation assurance.

This is on the basis that they will not be considered an eligible person who has complied with their obligations under the LDF.

We will also:

• seek to secure payment to protect our interests
• consider asking the Liechtenstein authorities for exchange of tax information

Substantive technical point

We will investigate to resolve a technical issue to determinewhether a disclosure is full and accurate. For example, we may have an alternative view on an individual’s domicile or residence status or the tax treatment of a marketed tax avoidance scheme. Where you have made a full disclosure of the facts and the dispute is one of interpretation the terms of the LDF will still apply. However, if we are deliberately misled or find a disclosure to be materially incomplete, we will withdraw the terms of the LDF.

Where we suspended previous enquiries due to your LDF registration

If an eligible person does not disclose liabilities established as a result of an unsettled intervention, we will investigate further to work out the correct amount of tax due.

When we suspect a partial, incomplete or false disclosure has been made

We consider a partial, incomplete or false disclosure to be a serious matter.

Where we suspect that the disclosure made is not correct or complete, we will start an investigation to work out the correct amount of tax due.

Investigations by us and interaction with LDF

The LDF requires a full, accurate and unprompted disclosure of all previously undisclosed UK tax liabilities, and a declaration that the disclosure is correct and complete.

Where we cannot accept a disclosure, we reserve the right to undertake the necessary action to resolve the issue. How we decide to pursue additional enquiries will depend on the circumstances of each case.

Materially false statements or documents that you provide as part of an LDF disclosure will result in our referring the matter for criminal tax investigation with a view to prosecution and withdrawal of the terms of the LDF.

Where we consider that a disclosure requires correction because of an error, some simple additional clarification or minor technical repair, we expect these to be remedied without a formal investigation. The single point of contact dealing with disclosures in Specialist Investigations (SI) offices will handle these. Full cooperation is expected and failure to cooperate will jeopardise acceptance of a disclosure and lead to withdrawal of the terms of the LDF.

Where we conduct a civil investigation, for example, in the circumstances referred to in ‘When will HMRC investigate’ or otherwise, and depending on the circumstances of each case and the information that we hold, it will be under either:

• Code of Practice 8: specialist investigations for fraud and bespoke avoidance
• Code of Practice 9: where HM Revenue and Customs suspect fraud

SI investigators will carry out civil investigations under Code of Practice 8 or 9.

The extent to which you co-operate with us and give us information is entirely a matter for you. In making this decision you may want to get help from your professional adviser. The offer with your disclosure may already have included a penalty, based on the fixed penalty which forms part of the full beneficial terms for the years 1999/00 to 2008/09. Penalties for other years, or where you do not qualify for full favourable terms of the facility, will be a percentage of the tax lost as a result of your conduct. The penalty percentage depends on your behaviour and the extent to which you help us arrive at the correct liability. You are entitled to have the matter of penalties dealt with without unreasonable delay.

Penalties in those circumstances outlined in the paragraph above, are chargeable in accordance with the provisions contained in legislation (in some cases up to 200% of the tax lost but subject to reduction for positive behaviour). More penalties information is available on GOV.UK and also in the following factsheets:

CC/FS15: Self Assessment and old penalty rules
CC/FS20: VAT dishonest conduct penalties
CC/FS7a: penalties for inaccuracies in returns and documents
CC/FS9 Compliance checks: The Human Rights Act and Penalties

Where we are deliberately misled or we establish deliberate and material omissions, we will withdraw the terms of the LDF.

We will write to the taxpayer concerned formally advising them where we decide to withdraw the terms of the LDF. If agreement cannot be reached over the tax, interest or penalties disclosed, we will issue assessments and/or determinations. In appropriate circumstances, we will also raise protective assessments in line with UK law before the relevant time limits expire.

Our investigation may also lead to your name being published as a deliberate tax defaulter as announced in the April 2009 Budget about failures on returns from 1 April 2010. This means that subject to all appeal opportunities expiring, we may publish on GOV.UK for a period of 12 months your name, address, nature of business, amounts of tax and penalty or penalties.

Appeals

Most of the decisions we take about the LDF are not decisions that you can appeal to the tax tribunal. But you are able to ask the courts to consider if the decisions were properly made.

Where we conduct a civil investigation and make assessments and/or determinations, you may appeal to the tax tribunal to ask for a hearing of your case.