German-Swiss tax deal could see UK-Swiss contract change

CHANGES TO the Swiss-German tax treaty announced today could see higher rates for UK holders of undeclared Swiss accounts.

The altered German-Swiss deal will mean that undeclared monies will be subject to an anonymous one-off charge of 21-41%, instead of the 19-34% previously in force.

A clause in the UK-Swiss deal – which currently operates at the same 19-34% in the original German-Swiss treaty – states that should Germany and Switzerland agree higher tax rates under their deal, the UK can request that the UK-Swiss treaty matches that.

However, a side effect of any rewrite between the UK and Switzerland is that UK’s deal with Liechtenstein represents better value.

Gary Ashford, who represents the Chartered Institute of Taxation (CIOT) on HMRC’s compliance reform forum, said: “We have seen much criticism of this [the UK-Swiss] deal in the UK and I would be surprised if ministers do not take the opportunity to ramp up the tax charges under the deal.

“However, the agreement between the UK and Liechtenstein for those with untaxed assets there to make a disclosure to HMRC in return for a small fixed penalty and reduced assessments is better value in many cases. If we see a further toughening of the UK-Swiss deal, then the Liechtenstein agreement may prove to be an even more attractive alternative, even for those holding money in Switzerland, as the Liechtenstein agreement covers worldwide assets providing a Liechtenstein asset is secured at the time of going forward to HMRC in the UK.

“Further recently proposed changes to the UK-Swiss agreement in relation to inheritance tax could mean executors of a UK citizen holding funds in Switzerland who dies sometime in the future could face tax charges of 40% of the fund, on top of the potential 34% which may have previously been taken. There are many more teeth to the current UK-Swiss deal.”


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