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Offshore tax drive could net government £9billion

The government could enjoy a £9billion tax windfall over the next four years, due to better-than-expected returns from a clampdown on offshore tax evasion.

HM Revenue and Customs’ permanent secretary for tax Dave Hartnett told Accountancy Age magazine that the tax disclosure scheme with Liechtenstein – which allows UK taxpayers with undeclared assets in bank accounts in the Principality to pay a reduced penalty in return for coming forward – had been more popular than expected.

He said the Liechtenstein Disclosure Facility (LDF) could raise up to £3billion by 2015 – three times the original estimate.

As well as declaring holdings in Liechtenstein itself, UK taxpayers with holdings in other offshore jurisdictions have transferred their assets to the Principality in order to take advantaged of the unique fixed penalty of 10 per cent on undeclared investments.

In addition, taxpayers using the LDF are only liable for tax owed on income over the preceding 10 years, rather than 20 years as is normally the case.

Nor is the Liechtenstein deal likely to be the last of its kind, with the UK currently negotiating with Switzerland on a ‘withholding’ tax to be levied on Britons with undeclared income in Swiss bank accounts. It has been estimated that this could net the UK treasury a further £3billion to £6billion.