SIGNIFICANTLY LESS than the £3bn target will be generated through the tax deal targeting UK residents with accounts in Switzerland, HM Revenue & Customs directors have told the Public Accounts Committee.
Tax assurance director Edward Troup and director-general Jim Harra (pictured) admitted in a hearing with the committee that £440m had been recovered this year and £782m received in total since the deal was signed last year.
The chancellor is expected to take account of the shortfall in December’s Autumn Statement.
Both Troup and Harra said the forecasts were originally “inaccurate” due to the “secrecy” of the Swiss banking system. “We have conveyed our concern about the amounts we were receiving [to the Swiss authorities]”, he said.
The accord struck between Britain and Switzerland forms part of an attempt by the UK to retrieve around £125bn in tax held in the secretive banking system globally, and saw accounts held by individual UK taxpayers in Switzerland subject to a one-off deduction in 2013, as long as the account was open on 31 December 2010 and on 31 May 2013.
Under the scheme, income and gains derived from investments held by UK taxpayers in Swiss banks are subject to a withholding tax, with the rates comparable to the UK top rate of tax, and payment satisfying UK liabilities.
The withholding tax does not apply if the account holder authorises disclosure of details of income and gains to the taxman. However, should they fail to disclose their affairs fully and pay, penalties of up to 150% of the amount owed may be imposed.
Earlier in October, HMRC began sending UK holders of Swiss accounts the first of 6,500 letters warning them of a deadline to settle their liabilities. Letters sent out from the end of September advised Swiss account holders they have six weeks to ensure they are compliant, inviting them to utilise the Liechtenstein Disclosure Facility, which allows Britons with bank accounts in the tiny European principality to settle tax liabilities on favourable terms. Originally due to end to end in March 2015, strong demand for the scheme saw it extended until 5 April 2016.
Despite driving the tax gap down in percentage terms to 7%, committee chair Margaret Hodge suggested the department is “institutionally incapable” given its growth in cash terms to £35bn. Committee member Austin Mitchell added it had shown a “supine attitude” in its treatment of large businesses.
Hodge said HMRC should “test the law” in its pursuit of greater tax yields from large businesses, but Troup reminded the committee the taxman’s job is to collects tax that law provides for.
“If the law provides the tax, we collect it. If it doesn’t, we don’t collect it”, he told the committee.
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