HM Revenue & Customs, the UK’s tax
collection authority, has announced that there will be a radical overhaul of how
it implements the Liechtenstein Disclosure Facility, an agreement that has been
widely cited as an example of how states can balance compliance and respect for
client privacy.

The authority’s overhaul relates to what
is called Code of Practice 9 and takes effect from 31 January.

Changes include:

-- Creating a written
contract between HMRC and the taxpayer, under which the taxpayer agrees to make
full disclosure and provide continuing co-operation while matters are resolved;

-- A written undertaking by
HMRC not to pursue a criminal investigation in exchange for full disclosure of
all tax frauds and continuing co-operation during the disclosure process;

-- HMRC will no longer give
an unlimited assurance of no criminal investigation for past wrongdoing if full disclosure and co-operation is not
forthcoming;

-- A 60-day time limit
within which to accept (or reject or ignore) HMRC’s offer of a contract and, if accepted, to provide outline disclosure;

-- An initial meeting with
the taxpayer, his or her professional advisor and HMRC at which it can be
decided whether additional “formal disclosure” is required;

-- The risk of
investigation for a separate criminal offence if materially false or misleading
statements are made, or materially false documents
are provided, during the CoP9 investigation;

-- For the first time, HMRC
will inform taxpayers that “many people find it helpful to appoint a specialist
advisor who is familiar with this code, in addition to their regular advisor”.

Advice from a professionally qualified
lawyer is essential if a taxpayer wishes to ensure what is called legal professional
privilege applies, according to Withers, the law firm. It said these changes will
be particularly relevant to UK
taxpayers with bank accounts or other assets in Switzerland, many of whom are
entirely innocent of wrongdoing, but others may have matters to disclose.

HMRC’s recently formed Overseas
Co-ordination Unit, which deals with such issues, is assessing large volumes of
data compiled from different sources.