UK and International Tax news
UK – Swiss Agreement On Offshore Tax Evasion
Friday 26th August 2011
Further to our International Tax News Item of 28 October 2010, which reported that UK and Swiss ministers had issued a joint declaration in October 2010 agreeing to start negotiations on co-operation on tax matters, an agreement has now been initialed (ratified in principle) in Zurich by Dave Hartnett, Permanent Secretary for Tax at HMRC and Michael Ambuehl, Swiss State Secretary, and is expected to be formally signed in the coming months. It will then go through Parliamentary and administrative procedures and is expected to come into force in 2013.
Under the terms of the agreement, existing funds held by UK taxpayers in Switzerland, being accounts open on 31 December 2010 and still open on 31 May 2013, will be subject to a one-off deduction of between 19% and 34% to settle past tax liabilities. This deduction will settle income tax, capital gains tax, inheritance tax and VAT liabilities in relation to the funds in the account. The deduction will 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. As a gesture of good faith Swiss banks will make an up-front payment from Switzerland to UK of CHF 500m. The agreement could yield up to £5bn in tax to the UK authorities.
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.
There will also be a new information sharing provision which will make it easier for HMRC to find out about Swiss accounts held by UK taxpayers.
If you would like more information on the above, please contact Keith Rushen on +44 (0)20 7486 2378.Contact Us