Swiss tax agreement announced
The long-awaited agreement with Switzerland over bank accounts held by UK taxpayers has now been finalised. In overview, the agreement will see a one-off “catch-up” charge of between 19% and 34% on account balances to settle previously undisclosed liabilities, and a new withholding tax of 48% on investment income and 27% on capital gains from May 2013.
As part of the agreement, HMRC will also be able to investigate alleged tax evasion involving Swiss accounts held by UK taxpayers. Unlike recent HMRC initiatives however, this is not an amnesty, and any taxpayers with Swiss accounts who are later subject to an enquiry by HMRC may be subject to penalties of up to 150% of the tax due.
Details of the agreement can be found here http://www.taxadvisorypartnership.com/news-distribution-service but there are a number of points worth making at this stage.
- The one-off deduction will only apply if the account was open on 31 December 2010 and is open on 31 May 2013.
- Neither the one-off deduction nor the withholding tax will apply if the account holder instructs the bank to disclose details of the account to HMRC. This is important as there may be legitimate reasons for holding a Swiss account and is likely to be the preferred course of action for those who do not have undisclosed tax liabilities. Many UK resident but non-domiciled individuals should fall into this category.
- Those who do have undisclosed tax liabilities will also be able to elect for disclosure to the UK tax authorities, and HMRC will then seek the relevant interest and penalties.
- It is perhaps surprising that the withholding rates are set slightly lower than the highest UK marginal tax rates. Presumably this is to account for the cash-flow disadvantage of suffering ongoing withholding tax as opposed to annual/semi-annual payments via the UK self-assessment system.
Please contact us if you would like to discuss how the agreement may affect you in more detail, and what your options might be in terms of disclosing unpaid tax to HMRC. Our team have extensive experience of helping clients through cases and negotiating with HMRC on their behalf to secure a fair outcome.