LDF and Swiss-UK Tax Agreement
Late payment interest | 9% GBP 94,747
rate Inheritance
Penalty 1992 - 1998 50% GBP 192,940
Penalty 1999 - 2009 50% GBP 53,115 | 10% GBP 10°623 | 10% GBP 10,623
Penalty 2010 - 2012 50% GBP 59,187 | 20% GBP 23°675 | 20% GBP 31,318
Total tax GBP 1,855,668 GBP 415,299 GBP 327,102
Tax in relation to 64.8% 14.5% 11.4%
total assets
Under normal taxation, Mr Thomson would have to pay 40% inheritance tax (IHT) on the assets his
father passes to him (GBP 1,052,745) less the GBP 71,000 tax exempt amount.” In 1990, the transfer
of the assets into the trust triggered taxes of 20%. This tax is known as IHT on transfer to trusts and
the tax rate depends on the type, value, timing and the beneficiary of the trust.’'® The rule primarily
applies to trusts, but since HMRC generally treats foundations as trusts, this tax also applies to Mr
Thomson’s transfer." In addition to the IHT, the foundation has to pay 6% for a 10 year-anniversary
tax on the asset value in 2000 and 6% on the distribution to the beneficiary.”
Finally, Mr Thomson would have to pay income tax on interest and gains of the last 20 years?? of
4096.? This all adds up to a payable tax due of GBP 1,855,668, including penalties of 5096." ^The
penalties could be lower or rather higher depending at the discretion of HMRC."
Assuming that the board of the foundation opens a bank account in Liechtenstein, transfers the re-
quired 20% of the total assets to the account and the bank issues a certificate of relevance, Mr Thom-
son could benefit from the LDF. Under this disclosure facility, only the occurrences since 1999 would
be relevant?" Therefore, he would not be forced to pay the IHT on his father's death. Only the 10 year
anniversary tax on the asset value in 2000 and 6% on the distribution to the beneficiary would matter.
30° HMRC, 2013 (4).
?*? HMRC, 2013 (5).
31 Voisin law, 2009.
?? Ernst & Young, 2012, p. 241 & 242.
?? Barry & Airey, 2012, p. 13.
?^ HMRC, 2013 (2).
*15 For the calculation it is assumed that 5596 are interest income, 25% are dividend income and 20% are capital
gains on average.
?'$ HMRC, 2012 (6), p. 1 & 2.
?" Barry & Airey, 2012, p. 13.
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