© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
August 25, 2011 5:55 pm
Who is this deal aimed at?
HMRC is specifically targeting UK resident individuals who have hidden assets in secret Swiss bank accounts to evade paying UK tax.
Is it an amnesty?
No – HMRC will still be able to investigate individuals it suspects of evading tax using Swiss accounts in cases where funds have left the account over the years. Account holders who do not want to suffer an automatic charge should make a full disclosure of the accounts and any irregularities.
What are the implications for individuals?
Under the terms of the agreement, existing funds held by UK taxpayers in Switzerland will be subject to a significant one-off deduction of between 19 per cent and 34 per cent (depending on the length of time held) to settle past tax liabilities. Those who have already paid their taxes on deposits held in Swiss banks will not be affected.
From 2013, a “withholding tax” of 48 per cent of the interest earned, 40 per cent of dividends, 48 per cent of other income and 27 per cent of capital gains will be deducted automatically by the bank and sent to HMRC annually. Details of individual accounts will not be revealed but account holders will get certificates stating they have paid tax on the gains from their deposits.
I hold more specialised investments in my accounts. How will these be taxed?
Questions remain as to how the “withholding tax” would be applied to capital gains on investment vehicles such as non-reporting mutual funds, hedge funds and certain structured products. “These are normally charged at the highest marginal rate of income tax in the UK, ie, often 50 per cent as opposed to 27 per cent,” said Mark Summers, partner at Speechly Bircham AG in Zurich. “It remains to be seen whether there will still be evasion on these investments.”
I have a Swiss account, could I be “named and shamed”?
The idea is that the tax will be collected without revealing the identity of the account holders. But HMRC will have the right to make a few hundred information requests a year of the Swiss regarding specific UK taxpayers – but without specifying particular banks.
What happens if I do nothing?
Your account will remain secret but you will lose up to a third or more of your money and still face all the risk of a tax investigation on funds that have left the accounts.
Are there any other options?
Under an existing agreement, holders of offshore accounts can transfer them to Liechtenstein, disclose them and only pay taxes owed since April 6 1999.
“In our experience, most disclosures made under the Liechtenstein Disclosure Facility result in many only losing 5 per cent or less of undisclosed funds and most losing less than 10 per cent,” said Mr Summers. “So many could favour this route over the Swiss deal.”
Can I just move my money out of Switzerland and put it somewhere else?
It’s not as easy as that. The new deal seeks to mitigate this risk by increasing the level of co-operation and transparency between the UK and Swiss authorities.
Paul Harrison, head of tax investigations at KPMG, said this included the Swiss authorities agreeing to notify HMRC of the destination of assets if they were moved, although not individual identities; and HMRC being able to request details, within limits, about suspected individuals even if the details of their Swiss accounts were not known.
It is also likely that other jurisdictions will come under significant global pressure if they gain a reputation of “safe harbour” for concealed assets and evaded taxes.
Please don't cut articles from FT.com and redistribute by email or post to the web.