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HMRC Signs Tax Deal With Switzerland

Expert Comments On Implications For UK


The UK has signed a “breakthrough” tax agreement with Switzerland in an attempt to tax money held in Swiss bank accounts by UK taxpayers.  The full text of the Treaty was published on 6 October 2011:

The deal – which can be seen here – includes a significant one-off deduction in respect of accounts which were in existence at 31 December 2010 to be applied in 2013 to untaxed monies, the product of which will be transferred directly to the Treasury.  The rate will be between 19% and 34% depending on the length of time the funds have been held in the account.  It will be applied to all forms of past tax liabilities.  Not every UK tax payer will be eligible. 

Thereafter an annual “withholding” tax of between 27% (on gains) and 48% (on investment income) will be applied depending upon how any taxable income has arisen.  These charges will not apply if full disclosure is made to HMRC.  If there has been a failure to disclose Swiss assets when challenged then the individual will not be able to benefit from the clearance of past tax liabilities.

Significantly, the deal will also grant the UK the right to request further banking details of up to 500 individuals annually.  The UK authorities will be able to make such a request where it specifies “plausible grounds” for suspecting a tax risk relating to the individual.  So called “Fishing expeditions” are not permitted however.  The individual will be notified of such a request unless HMRC has reasonable grounds for believing that this may seriously prejudice the assessment or collection of tax.

Swiss authorities will also provide the UK with information regarding the 10 States or jurisdictions to which the largest volume of funds withdrawn from Swiss banks are transferred following the announcement of this agreement. 

A new UK-Swiss joint commission will audit the relevant banks to ensure compliance. 

Individuals already under investigation cannot benefit from the clearance of past tax liabilities.

A separate accord which includes immunity from prosecution was reached with Liechtenstein in 2009.  Further details of the Liechtenstein Disclosure Facility (“LDF”), which remains open, can be found here.

Maurice Martin, tax investigations partner at Irwin Mitchell, said, “The existing LDF arrangements may be more suitable for UK individuals when compared to the publicised terms of the Swiss deal. 

"A careful review of individual circumstances is strongly recommended in order to consider, for example, avoiding prosecution, incurring a lower penalty and being exposed to a shorter period of enquiry.”

Should you wish to receive legal advice regarding these matters please contact Sarah Wallace on 020 7421 3876 or by email: Sarah.Wallace@irwinmitchell.com.