UK and Switzerland announce historic agreement

UK and Switzerland announce historic agreement

Deal to be worth billions of pounds to the Exchequer

UK TAXPAYERS with Swiss accounts will pay a “significant one-off” deduction to settle past tax liabilities under a historic agreement between the two countries worth billions of pounds for the Exchequer.

It is understood the charge will be about 19%to 34% of the value of the account depending on the age of the account and the value of the funds withdrawn since 2003. This will cover all forms of past tax liabilities.

The account holders will be able to instruct their banks to disclose their account details. For those accounts, HM Revenue & Customs will seek unpaid taxes plus interest and penalties. Those people who have no tax liabilities and choose to disclose will not pay anything.

Under the agreement, the UK will also be allowed to request account details of up to 500 people a year who they suspect of tax evasion, whether the individual authorises their bank to do so or not.

As part of the agreement, which has been trailed for a year, the Swiss government will pay an up-front payment of 500m Swiss francs (£384m) as a “gesture of good faith”, the Treasury has announced.

As widely expected, from 2013, a withholding tax on investment income and gains will be introduced, which will be “very close” to the top rate of tax. Accountancy Age understands that capital gains tax will be charged at 27%, dividends 40% and interest 48%, on the assumption that the account holders will be top rate tax payers.

The agreement was ratified in principle today by HMRC permanent secretary Dave Hartnett and Swiss state secretary Michael Ambuehl, and will be signed later in the year after going through Parliament.

George Osborne, chancellor of the Exchequer, said “the days when it was easy to stash the profits of tax evasion in Switzerland are over”.

Hartnett said “nobody would have anticipated that we would conclude an agreement with Switzerland to tackle tax evasion” a few years ago.

“However, with the clear wish of Switzerland as well as the UK to ensure that tax is paid as it should be, we are embarking on a new course which preserves important principles for each jurisdiction, and will be fair for all UK taxpayers,” he added. “Our strategy is working. We will secure significant sums of tax that some had thought we would never see. Not only does this agreement settle past liabilities and make arrangements to secure correct taxation in the future, it also gives HMRC more scope to find out about Swiss accounts.”

Mike Warburton, tax director at Grant Thornton, said it was a great deal for the UK. The naming of 500 individuals a year could lead to the targeting of “big name celebrities who HMRC suspect of hiding money offshore”. He added: “This will put fear and trepidation into people with offshore accounts. If you are trying to evade your taxes, they should be able to get you. Until now, everyone thought if you have money in Switzerland, it was safe from the taxman. That is no longer the case.”

John Cassidy, tax investigations partner at PKF, said this will be of huge worth to the UK. “Whether we are talking about £5bn for the Exchequer or £500bn, we don’t know.”

Non-Domiciled individuals (non-Doms) could have problems, however. “Non-Doms can opt out but if they opt out incorrectly and it turns out they remitted funds, the Revenue will come down hard on them,” Cassidy said.

“Those individuals should be very sure of themselves. As well as the one-off payment for the past, the non-Doms cannot opt out of the withholding tax. How that ties in with the announcement of investment remittance, we don’t know.”

 

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