LDF and Swiss-UK Tax Agreement 
  
  
  
  
  
  
  
  
Income & gains 2011 35.5% GBP 1,586 | 35.5% GBP 1,586 | 50% GBP 2,233 
Income & gains 2012 35.5% GBP 9,609 | 35.5% GBP 9,609 | 50% GBP 13,533 
Late payment interest rate | 7.5% GBP 3,413 | 7.5% GBP 3,413 | 7.5% GBP 3:997 
Penalty 2004 - 2009 50% GBP 12,667 | 10% GBP 2,533 | 10% GBP 2,855 
Penalty 2009 - 2012 50% GBP 10,085 | 20% GBP 4,034 | 20% GBP 4,948 
Total tax burden GBP 71,669 GBP 55,484 GBP 65,088 
Tax in relation to 15% 11.6% 13.6% 
total assets 
  
  
  
  
In this case, the total tax burden under normal disclosure would be GBP 71,669 compared to GBP 
55,484 and GBP 65,088 under normal LDF disclosure or choosing the Composite Rate Option.” Thus 
the tax burden is around 20% lower under the LDF. However, the 50% penalty taken into considera- 
tion is only an assumption and might be higher or lower according to HMRC’s decision. Under the 
LDF, a penalty of 1096 is due for the years up to 2009 and 2096 for subsequent years." Furthermore, 
ordinary disclosure does not provide immunity from prosecution, in contrast to the LDF (except in the 
case of criminal acts). Therefore, the advantage of the LDF might be small but tangible. 
2.4.3 Case2 
The following is inspired by a real case from KPMG.*® 
Mr Thomson is domiciled and residing in the UK. His father opened a Swiss bank account in 1979 and 
deposited GBP 800,000.00. The assets were invested according to a balanced investment strategy. In 
1986, his father died and Mr Thomson inherited the bank account with a value of GBP 1,052,745 at 
that time. The assets were never declared to HMRC at any point. Since Mr Thomson was not reliant 
on the assets at that time, he established a foundation in Panama for succession planning in 1990. The 
Swiss bank account was assigned to the foundation. The foundation was given the discretionary power 
to decide on the time, amount and type of distributions with the board of the foundation. Mr Thomson 
was the first beneficiary and his two children are mentioned in the by-laws as second beneficiaries in 
equal parts. The first and only distribution to the first beneficiary was in 2004 in the amount of GBP 
100,000. The bank account accumulated income and gains of GBP 1,336,563 from 1992 to 1999, GBP 
173,130 from 1999 until 2009 and a further GBP 348,178 from 2010 until 2012. Mr Thomson's law- 
  
305 For the calculation it is assumed that 55% are interest income, 25% are dividend income and 20% are capital 
gains on average. 
95 Berwick, 2010, p. 45. 
?" Barry & Airey, 2012, p. 13. 
$5 KPMG, 2012, p. 4. 
51