UK and International Tax news

HMRC Issue Factsheet On UK – Swiss Tax Cooperation Agreement

Friday 9th November 2012

HMRC have recently issued their factsheet on the UK – Swiss Tax Cooperation Agreement in order to remind UK taxpayers with assets in Switzerland that the agreement might affect them. It outlines the action that they can take to esure that their tax affairs are brought up to date.  The factsheet is for guidance only and supplements Frequently Asked Questions published at the time of the signing of the agreement in October 2011.

As previously reported, under the terms of the original agreement, funds held by UK taxpayers in Switzerland on 31 December 2010 and still in existence on 31 December 2012, were to be subject to a one-off deduction [regularisation tax] of between 19% and 34% to settle past tax liabilities including income tax, capital gains tax, inheritance tax and VAT liabilities, in relation to the funds in the account.  The deduction would not be applied if the account holder instructs the bank to disclose details of the account to HMRC.  Following that disclosure, HMRC will seek unpaid taxes with relevant interest and penalties.

The agreement also provided that where the level of the regularisation tax in the agreement between Switzerland and Germany is higher than that included in the UK – Swiss agreement, the UK can request the higher rate of tax to apply, which it has subsequently.   In paricular, the one-off regularization payment is to be calculated in accordance with a revised formula.  The applicable rate is 34%.  Where the tax charge amounts to 34% or more and the relevant capital amounts to one million pounds sterling or more, the tax charge (applicable on the entire relevant capital) shall increase by 1% for each additional million pounds sterling relevant capital, up to a maximum of 41%. The minimum rate has increased to 21%.

From 2013, income and gains arising on investments held by individual UK taxpayers in Swiss banks will be subject to new withholding tax rates. These rates will be close to the top UK rates, being 48% on investment income and 27% on gains. Payment of the withholding tax will satisfy UK tax liabilities on the income and gains. The withholding tax will not apply if the account holder authorises disclosure of details of income and gains to HMRC and pays any associated taxes in the UK. 

HMRC advise that a taxpayer may at any time take the opportunity of making a voluntary disclosure to them or via the Leichenstein Disclosure Facility, subject to the relevant entry conditions being satisfied.

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