The terms of the Liechtenstein Disclosure Facility agreement between the UK and the tiny principality have been amended to tighten up the conditions for clients to qualify as having a “meaningful relationship” with Liechtenstein.

UK taxpayers wishing to regularise their tax affairs through the LDF must prove a “meaningful relationship” with the principality so that a Liechtenstein Financial Intermediary can issue a Certificate of Relevance before the process can move forward. However, the term wasn’t precisely defined in the original legislation.

The new rules, as clarified by the accounting and tax team SMP, are as follows. They come into force from 1 September this year.

• In the case of banks, either SFr3 million ($3 million) or at least 20 per cent of the worldwide, undisclosed assets must be booked with a Liechtenstein bank for a period of time expected to be at least 24 months.

• In the case of a trust company, a relationship exists if the association is domiciled in Liechtenstein or a special endowment is managed by at least one Liechtenstein trustee. In addition, either SFr1 million or at least 10 per cent of the worldwide, undisclosed assets of the relevant person must be booked in a bank account of the association or special endowment in Liechtenstein.

• In the case of a legal entity domiciled abroad but managed in Liechtenstein, SFr1 million or at least 15 per cent of the worldwide, undisclosed assets of the relevant person must be booked in a bank account of this legal entity in Liechtenstein.

• In the case of an insurance company, if the person takes out an insurance policy with a Liechtenstein insurance company for a minimum premium of SFr150,000.

Before the changes, clients could invest relatively small funds in Liechtenstein in order to qualify for the LDF and obtain favourable tax treatment by the UK authorities.

“The new thresholds are intended to ensure that the LDF will only apply in the future to those persons who invest and retain a substantial proportion of their worldwide assets in Liechtenstein. This is a considerable tightening of the qualification regime for the LDF. Anyone deliberating about whether or not to make use of the LDF may find it beneficial to do so before these new thresholds commence on 1 September 2012,” SMP said in a statement.

“However, whether a disclosure is made pre- or post-1 September 2012, the LDF still remains a very favourable facility for UK taxpayers to regularise their UK tax affairs.

The LDF was signed in August 2009, and was originally designed to run from 1 September 2009 to 31 March 2015 but it has been since extended to 5 April 2016. Last month HM Revenue & Customs revealed that some 2,400 people have come clean about unpaid taxes as a result of the LDF, with £363 million (around $564 million) having already been paid in tax bills.The yield of £363 million is made up of £296 million generated from settled cases and £67 million paid in cases not yet settled.