UK and International Tax news
UK – Swiss Tax Agreement Signed
Friday 14th October 2011
The previously announced tax agreement between Switzerland and the UK was signed in London on 6 October 2011. See our International Tax News item of 26 August 2011.
The agreement includes the following provisions:
* A powerful anti-abuse clause to prevent the promotion of avoidance by Swiss banks
* A programme of audits, overseen by a new UK-Swiss joint commission, to ensure that banks are complying with their obligations
* Switzerland will collect data on the destination of funds withdrawn from the country following the announcement of this agreement, and will share that data with the UK
* There will be no clearance of past liabilities for those involved in criminal attacks on the tax system or for anyone whose Swiss assets are the proceeds of non-tax crime
* Any person who has failed to disclose their Swiss assets when challenged will not be able to benefit from the clearance of past tax liabilities
* HMRC’s ability to carry out investigations will be preserved: any person under investigation cannot benefit from the clearance of past tax liabilities.
The agreement is expected to come into force in 2013, following scrutiny by Parliament and after ratification procedures in Switzerland are complete.
As previously reported, accounts held by individual UK taxpayers in Switzerland will be subject to a one-off deduction in 2013, as long as the account was open on 31 December 2010 and is open on 31 May 2013. 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.
From 2013, income and gains arising on investments held by individual UK taxpayers in Swiss banks will be subject to a new withholding tax. The rates of this withholding tax will be very close to the top rates of UK tax. 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 here.
The agreement contains specific provisions covering the position of resident but non UK domiciled individuals. In order to qualify as a non-UK domiciled individual, a person must claim the remittance basis, and their domicile status must be certified by a professional (a lawyer, accountant or tax agent).
The Agreement contains a wide range of exclusions from tax clearance for the past, including:
* those who are under enquiry by HMRC at the time the treaty enters into force
* those who have been successfully prosecuted as a result of an HMRC criminal investigation
* those who have relevant assets arising from the proceeds of crime including those from attacks on the tax system, such as MTIC fraud.
Where a person comes within an excluded category any levy paid to the UK will be treated as a payment on account.
A powerful new provision will allow HMRC to discover whether an individual UK taxpayer has an account in Switzerland. This power is in addition to, and goes further than, the provisions for information exchange under the UK-Switzerland DTA.
The Agreement contains an anti-abuse provision which ensures that if banks promote schemes for avoiding the withholding tax due under this agreement, the bank itself will become liable for the tax avoided.
The Swiss authorities will give HMRC information about the top ten destinations which they identify as places where money is moved to. This will help HMRC target future compliance activity.
A joint commission will be established to oversee the Agreement and to make recommendations for future changes. Aggregated data on the outcomes and main findings of audits undertaken by the Swiss authorities will be made available for publication.
Given the above, those with under declared assets should review their positions and, depending on circumstances, consider the Liechenstein Disclosure Facility [LDF] which may allow a regularisation of tax matters on more favourable terms with HMRC.
If you would like more information on the above, including the LDF, please contact Keith Rushen on +44 (0)20 7486 2378.
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