The taxman published a “warning” today that “UK residents with Swiss bank accounts face new landmark taxation arrangements from 1 January 2013”.
The new Swiss Tax Agreement between the UK and Switzerland means that bank account holders must either provide full details to HM Revenue & Customs (HMRC) or pay over a large proportion (i.e. nearly half) of their full bank balance, plus face a future withholding tax (at about 49%). Exchequer Secretary David Gauke said: “The days when hiding money in Switzerland in order to evade tax are over. Burying your head in the sand is no longer an option. The only realistic strategy is to talk to HMRC, as quickly as possible.”
It is understood that the Swiss banks or their accountants are writing to people affected by the agreement. Some are asking customers to close their accounts. If this happens, HMRC warn that UK residents must ensure that any outstanding tax liabilities are paid. Large numbers of people are now believed to be making voluntary disclosures to HMRC. Most of these are choosing to use the very advantageous terms of the current Tax Amnesty also known as the Liechtenstein Disclosure Facility.
The Swiss Tax Agreement provides for a withholding tax on future income and gains. Rates currently range from 27% on capital gains up to 48% on interest or other non-dividend income. Where the payment option is chosen, there will also be a one-off charge – of up to 41% of the total value of the account. However, those people opting to suffer tax at source instead of making a disclosure could still face a tax investigation in the future, including potential criminal prosecution.
What does this mean for me?
If you hold a bank account in Switzerland then you have a short period of time to decide what to do regarding your tax affairs. You will have to sign an election for your bank authorising them either to: deduct tax at source; or to notify your account to HMRC.
Even if you elect for the anonymity route, and allow a deduction of tax at source, this does not prevent the bank from passing your details on to the taxman at some point in the future. In other words you might still get a future tax enquiry. If you allow the bank to disclose your details then a serious tax investigation in the near future is inevitable. Your other alternative is to elect for the bank to disclose your details – but to pre-empt matters by making a voluntary disclosure to HMRC now. Usually, the best way of making such disclosure is the Liechtenstein Disclosure Facility Tax Amnesty.
Worried about an offshore bank account?
Lynam Tax Enquiry Experts have substantial experience of the key issues. We are helping many clients and their agents with the current tax amnesty.
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