Why you need to act now if you have undisclosed Swiss bank accounts
The UK and Swiss Governments entered into a new and historic Tax Co-operation Agreement to tackle offshore tax evasion in the UK whilst preserving banking secrecy in Switzerland. The agreement came into force on 1 January 2013.
The key points are as follows:
- Accounts held by UK taxpayers in Switzerland which were open on 31 December 2010 and remained open on 31 May 2013 would be subject to a “one-off payment” of tax of between 21% and 41% depending on the balances involved and the length of the Swiss banking relationship. This one off payment would settle all previous income tax, capital gains tax, inheritance tax and value added tax liabilities in relation to the funds in the Swiss accounts
- The one-off payment would not be applied if the account holder instructs the Swiss bank to disclose full account information to HMRC
- From 1 January 2013, income and capital gains on Swiss accounts realised by individual UK taxpayers would be subject to a “final withholding tax”, set at 48% on interest income, 40% on dividend income and 27% on capital gains
- Again, this final withholding tax would not be applied if the account holder instructs the Swiss bank to disclose full account information to HMRC
- There is a powerful new information exchange provision going beyond the existing powers in the UK/Swiss double tax treaty to allow HMRC to discover whether an individual has an account in Switzerland
- These new rules would however have a limited application to UK resident non-domiciliaries in that they will only apply to income and capital gains with a UK source or which are remitted to the UK
- The effects of the UK/Swiss tax agreement can be side stepped by closing all Swiss accounts and moving the funds to a different jurisdiction. Data on the destination of the funds would be collected and details of the top ten destinations would be supplied to the UK Government
Whilst the UK/Swiss tax agreement is highly relevant to UK resident individuals with Swiss accounts, it must be considered in the wider context of the tax investigation activity by HMRC. In particular, the agreement does not provide an immunity from criminal prosecution, and it is not a voluntary disclosure facility.
It is very likely that if you have undisclosed tax liabilities in connection with your Swiss banking relationship then the Liechtenstein Disclosure Facility is likely to offer you the best opportunity to put your tax affairs in proper order.