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.