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Frequently Asked Questions for Swiss Account/Asset Holders
On 24 August 2011, the UK Government announced a historic deal with Switzerland to tackle tax evasion. This is the latest step in HM Revenue & Customs' (HMRC) crackdown on offshore tax evasion, which includes:-
- The Liechtenstein Disclosure Facility;
- A new dedicated team of investigators to catch those hiding untaxed monies offshore; and
- Increased exchange of information with other countries.
Under the terms of the UK-Swiss Agreement, existing untaxed funds held by UK taxpayers in Switzerland will be subject to a one-off deduction in 2013 (provided the account was open on 31 December 2010 and is still open on 31 May 2013). The deduction will be between 19% and 34% and will anonymously settle any Income Tax, Capital Gains Tax, Inheritance Tax and VAT liabilities that might be due. 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 financial penalties.
As a gesture of good faith, Swiss banks will make an up-front payment of CHF 500million.
From 2013, a withholding tax will applied to ensure future tax compliance by UK residents holding funds/assets in Switzerland. Again, the withholding tax will not apply if the account holder authorises disclosure of the income and gains to HMRC and pays any associated taxes in the UK.
The UK-Swiss Agreement is due to come into force at the beginning of 2013. Before then, the precise terms of the Agreement will be finalised. These FAQs set out OneE TDI's understanding of the Agreement (as at August 2011).
On this page:
Who is affected by the UK/Swiss Agreement?
The Agreement only applies to 'natural persons resident in the United Kingdom' who hold assets in Switzerland – either directly or indirectly through a trust or other structure in which they have a beneficial interest. In principle, the Agreement does not apply to non-UK domiciled individuals.
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What assets will be regularised under the Agreement?
The Agreement covers all assets (bank accounts and securities portfolios) held by 'natural persons (see above) at banks, brokers, Postfinance (i.e. held via the Swiss Post) and asset managers.
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What options are available under the Agreement?
Once the Agreement has come into force, an individual will have only five months to choose one of the following options: -
- Regularise the past either anonymously (by way of a one-off flat rate tax deduction) or by making a disclosure to HMRC (and the Swiss Federal Tax Administration (SFTA); or
- Final Withholding Tax either anonymously (by way of an annual flat rate tax being deducted) or by making a disclosure to the SFTA.
The flat rate tax is the 'default option'. If clients decide not to choose either option, they will have to withdraw their funds/assets from Switzerland within five months of the Agreement coming into force.
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Are these the only (or best) options to bring my tax affairs up-to-date?
No. The Liechtenstein Disclosure Facility (LDF) is unaffected by the UK/Swiss Agreement. The LDF offers a number of potential benefits to taxpayers, which can lead to real 'tax savings' (rather than a flat rate tax just being applied). The LDF also offers a guaranteed immunity from prosecution.
Under the LDF, taxpayers cannot regularise their affairs anonymously, which they can under the UK-Swiss Agreement. Specialist advice from OneE TDI to decide which option is best for you is essential.
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If I choose the flat rate option will my details be provided to HMRC?
No. The bank will deduct the flat rate tax and pay it to the SFTA who, in turn, will pay HMRC. The client's identity will, therefore, not be disclosed to HMRC. You will receive a certificate from the bank showing the tax deducted and this can be used as evidence to support your case if your affairs are enquired into by HMRC.
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In which currency will any taxes be levied?
GBP (Sterling).
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Could I still be prosecuted?
If HMRC was criminally investigating your affairs before this Agreement was signed then you are still at risk of being prosecuted. The regularisation programme means that clients will not be prosecuted for tax offences linked to their Swiss assets.
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How will the anonymous regularisation of my past tax affairs work?
A one-off payment will be made to HMRC via the SFTA. The bank will deduct the flat rate tax (maximum rate = 34%) from the value of the funds/assets held. This will occur five months after the Agreement comes into force.
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What if I want to make a disclosure to HMRC (and the SFTA)?
If you do not want 'anonymous regularisation' you can make a voluntary disclosure to HMRC without fear of prosecution. If you choose the disclosure option, you must tell your bank and authorise the bank to notify the SFTA. The bank will then provide the following information to the SFTA and the SFTA will forward it on to HMRC: -
- Your name, address and date of birth;
- Details of the Bank;
- Your account number or IBAN code;
- Yearly account balances; and
- A statement of assets at the end of each year (within the statutory limitation period).
You will receive a certificate from your bank confirming the information it has provided to the SFTA.
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What if my UK tax affairs are in order?
You must notify the bank. If not, then the flat rate tax will be applied (as this is the default option). You must formally authorise the bank to notify the SFTA of the assets it has under management. The SFTA will then forward this information to HMRC.
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How will the Final Withholding Tax work in the future?
The final withholding tax for the future will tax income from assets (interest income, dividends, other income and capital gains) anonymously by way of a deduction equivalent to UK Income Tax. As at August 2011, these were: -
(a) Interest Income (48%);
(b) Dividends (40%);
(c) Capital Gains (27%).
Again, this will be the default option. The banks will deduct the appropriate tax and forward this amount anonymously to the SFTA. The SFTA then pays HMRC. The bank will provide you with a certificate showing the tax deducted.
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What if I want to make a voluntary disclosure rather than suffer the Final Withholding Tax?
You must formally authorise the bank to notify the SFTA of the assets it has under management. The SFTA will then forward the following information to HMRC: -
- Your name, address and date of birth;
- Details of the Bank;
- Your account number or IBAN code;
- Details of the relevant tax year; and
- The total investment and/or gains made.
You will receive a certificate from your bank confirming the information it has provided to the SFTA.
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Can I offset losses carried forward against profits in another account?
Yes, provided the accounts are with the same bank.
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Will HMRC be able to obtain information about me irrespective of this Agreement?
The Swiss government and banks have sought to protect confidentiality, wherever possible. However, within the terms of the Agreement, HMRC is entitled to monitor the Final Withholding Tax regime by way of random queries. A maximum of 500 such queries a year can be made. Any HMRC queries must identify the name of the taxpayer and state the reasons why information is being requested.
This query process can only be used for the future. Past assets that have been regularised by way of a 'one-off' payment cannot be queried.
It is important to note that the Final Withholding Tax regime is recognised as being equivalent to (and effectively stands in the place of ) the automatic exchange of information between the UK and Switzerland.
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What is the one-off payment being made by Switzerland?
The Swiss banks will make an up-front payment of CHF500million in respect of untaxed assets. This amount will be offset by tax payments made later by clients.
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Are similar Agreements being signed with other countries?
An Agreement has already been signed with Germany and Switzerland is known to want to conclude other similar Agreements. One of its aims is for Swiss banks to be able to focus on the acquisition and management of taxed assets in the future.
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How can OneE TDI help?
If you know or suspect that you need to disclose undeclared income, profits and/or gains to HMRC (whether they arise in the UK or offshore) you should seek specialist advice from OneE TDI before doing so. The management of the disclosure process and the way in which the relevant facts are presented to HMRC are key to achieving maximum penalty mitigation and protecting you from further enquiry by HMRC. In addition, you can also protect yourself from being 'named and shamed' by HMRC as part of its 'Publishing the Names of Deliberate Defaulters' programme.
At the core of OneE TDI is a highly experienced team specialising in all areas of tax disputes and investigations. We offer confidential, non-judgemental and invaluable advice to best defend our clients. We have a proven track record in managing all contentious tax matters and provide an outstanding, cost-effective service which results in tangible benefits and savings for our clients. We have up-to-date knowledge of all HMRC campaigns and disclosure facilities and are able to secure the best available terms for our clients.
We take control of and manage all issues relating to tax disputes and investigations so that our clients can get on with their life and their business. What price peace of mind?
Please see the Testimonials kindly provided by our clients (or their accountants or lawyers), which confirm our levels of client service.
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How can I contact OneE TDI?
If you would like a free, confidential, no obligation discussion with us please contact either Gary Rowson or Mark Taylor on 0800 652 6156 or complete and submit the online form below.
Whilst we endeavour to provide informative and accurate information, the content on this site is for general information purposes only and should not be taken to constitute tax or legal advice which must always be tailored to individual circumstances. Please contact us if you would like to discuss matters.
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UK-Swiss Tax Agreement