Page last updated at 10:38 GMT, Tuesday, 11 August 2009 11:38 UK

UK signs Liechtenstein tax deal

Vaduz castle, home of the Liechtenstein  princely family
Liechtenstein has come under pressure to open up its financial records

The UK has signed a breakthrough deal to recover lost tax from Britons holding bank accounts in Liechtenstein.

HM Revenue & Customs (HMRC) has agreed with the Alpine tax haven to start exchanging information.

Up to 5,000 British investors are thought to have an estimated £3bn in secret accounts in the country.

Investors will be offered the chance to volunteer details of their deposits in return for penalties, capped at 10% of tax evaded over the past 10 years.

HMRC said that those who failed to make a full disclosure would have their accounts closed down and risk losing all their savings.

"Those who have been evading UK tax on assets held in Liechtenstein banks must now settle with us. There are no alternatives," said HMRC permanent secretary for tax, Dave Hartnett.

Treasury minister Stephen Timms added that the agreement was "very good news for honest taxpayers and investors everywhere", saying it represented "a big step forward for tax transparency".

Pressure

Liechtenstein was once seen as one of the most secretive jurisdictions, favoured by the wealthy looking to shelter money from their own tax authorities.

ANALYSIS
Mark Sanders, BBC News, Vaduz
After he signed the agreement with Liechtenstein, Treasury minister Stephen Timms acknowledged that such a deal would have been "pretty unimaginable" a year or two ago.

The British government hopes that within five years, no accounts in Liechtenstein will be hidden from HM Revenue and Customs.

Liechtenstein has agreed to close the accounts of British investors who will not disclose financial information to the UK tax authorities.

The deal goes beyond what the Alpine principality has already agreed with the US and Germany.

With tax revenues falling because of the recession, governments around the world are eager to track down and recover revenue that should have been paid to them in tax.

However, it came under pressure last year after the German government obtained a list of wealthy Germans with money stashed away.

More generally, pressure has mounted on tax havens to share information since April's G20 Summit and similar deals have already been struck with the US and Germany.

"People with money hidden in Liechtenstein should come clean now," said Chas Roy-Chowdhury of the ACCA accountancy body.

"This is their last and best chance; the world is going to get tougher for them, and they are going to be caught out," he warned.

Miscreants who confess will find the cash they have to hand over to HMRC will not be limited to just the penalty of 10%.

They will have to repay all the tax they should have paid in the first place, up to 10 years.

And they will also have to pay interest, which could turn out to be worth far more than the formal penalty charge.

Squeeze

Governments are particularly keen to trace and recover unpaid revenues as tax receipts fall in the global recession.

In April, the UK government launched a second push to squeeze millions of pounds in unpaid tax from UK citizens with offshore accounts.

It has already signed agreements with tax havens such as Jersey, Guernsey, Isle of Man, and the British Virgin Islands to allow the exchange of financial information on UK residents.

The Revenue's first disclosure campaign in 2007 raised £450m from 45,000 people.

That targeted offshore accounts held by the customers of the UK's big High Street banks.

"Tax havens are being squeezed by the larger economies such as the USA and the UK," said Mr Chowdhury of the ACCA.



Print Sponsor


SEE ALSO
The taxman cometh to Liechtenstein
11 Aug 09 |  Business
New grab for hidden offshore cash
23 Apr 09 |  Business
UK probes Liechtenstein tax haven
22 Jul 08 |  Business
Hunt for Liechtenstein tax mole
12 Mar 08 |  Business
Is time running out for tax havens?
05 Mar 08 |  Business
Q&A: Liechtenstein and tax evasion
25 Feb 08 |  Business

RELATED INTERNET LINKS
The BBC is not responsible for the content of external internet sites



FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

BBC navigation

BBC © 2013 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.

Americas Africa Europe Middle East South Asia Asia Pacific