New agreement for UK taxpayers holding swiss accounts

A new agreement has been reached by the UK and Swiss governments with effect from 1 January 2013 to combat offshore tax evasion and is expected to raise billions of pounds in previously unpaid tax for the treasury. The agreement will apply to currency, precious metals, bonds and shares, but property and safety deposit assets are specifically excluded. HM Revenue and Customs (HMRC) has advised that it will look through complex structures such as shell companies, trusts and foundations to identify the beneficial owner of the Swiss asset.

UK taxpayers with Swiss accounts will be provided with two options under the agreement:

1. Payment of withholding tax at source, both in respect of a one-off payment to cover liabilities prior to the agreement, and an annual withholding for years post the agreement; or
2. Voluntary disclosure to HMRC regarding Swiss assets and associated income.

Option 1 - (Route one) Withholding tax payments for previous years

Existing funds held by UK taxpayers in Switzerland will be subject to a significant one-off deduction between 19% and 34%, based on the value of the Swiss assets held, to settle past tax liabilities. This will be calculated by the Swiss banks and paid to the UK on an anonymous basis. Swiss banks will make an up-front payment of CHF 500m as a sign of goodwill. Those who have already paid their taxes will be unaffected.

Option 1 - (Route two) Withholding tax payments for future years

From 1 January 2013, a new withholding tax of 48% on investment income and 27% on gains will be deducted by Swiss banks and paid anonymously to the UK. This will be coupled with a new information sharing provision which will make it easier for HMRC to find out about Swiss accounts held by UK taxpayers. There will be no charges for UK taxpayers who fully disclose their affairs to HMRC.

Option 2 - Voluntary notification

Those who do not wish to make a payment through either route from option one, as described, may instead authorise the Swiss bank to disclose all relevant information to HMRC. HMRC will then deal with previous and future years' payments.

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