The landmark tax agreement between the UK and Switzerland was signed in London today. HM Revenue & Customs expect it to bring in billions of pounds of extra tax to the UK.
The Swiss Tax Agreement means that UK taxpayers’ funds in Switzerland face huge one-off deductions to settle past tax liabilities: of between 19% and 34%.: where the account was open on 31 December 2010 and is still open on 31 May 2013. This deduction will settle income tax, capital gains tax, inheritance tax and VAT liabilities in relation to the funds in the account. Those charges will not apply if the taxpayer authorises a full disclosure of their affairs to HMRC. However following any such disclosure, HMRC will seek unpaid taxes, interest and penalties directly from the taxpayer.
Then, from 2013, there will also be a new Withholding Tax (of 48% on investment income and 27% on capital gains): which will apply to anyone who has not told the taxman about those assets.
The Swiss Tax Agreement includes the following provisions:
- HMRC has got a new power to discover whether an individual UK resident has an account in Switzerland, and to get details about those bank accounts;
- Anyone who has previously been challenged by HMRC and failed to disclose Swiss assets, anyone actively undergoing a tax investigation or after the date the treaty comes into force, and anyone convicted following an HMRC criminal investigation, will not be able to benefit from the clearance of past tax liabilities;
- A new UK-Swiss joint commission will conduct a “programme of audits”, to ensure the Swiss banks’ compliance with their obligations;
- The Swiss will collect data on the destination of any funds withdrawn from Switzerland following the announcement of this agreement, and will share that data with the UK.
- The agreement is expected to come into force in 2013, following scrutiny by the UK Parliament and after ratification in Switzerland.
- UK residents who are non-UK domiciled are outside the scope only they claim the remittance basis (and pay the Remittance Basis Charge: currently £50,000), and have their non-domicile status certified by a professional (e.g. an accountant or tax agent that is a member of a recognised body. Nb: Lynam Tax Ltd is a member firm of both the ICAEW and the ACCA).
The chief tax inspector said: “The world is shrinking fast for offshore tax evaders and this agreement will ensure that we know where money that flees Switzerland is heading. We won’t be far behind.”
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