26 August 2011 - Swiss deal announced

HM Treasury has announced that the UK and Switzerland have initialled an agreement, as part of HMRC’s continuing efforts to tackle offshore tax evasion.

The main proposals in the agreement are that:

• In 2013, existing funds held by UK residents in Switzerland will be subject to a one-off deduction of between 19% and 34% on their principal sum to settle past tax liabilities.  The actual tax rate will depend on the length of time the account was held and the value of the funds deposited / withdrawn since 2003. The one-off payment will be based on the value of the account as at 31 December 2010.  This deduction will settle all outstanding UK income tax, capital gains tax, inheritance tax and VAT liabilities. To be eligible for this deal the Swiss account must have been open on 31 December 2010 and still in existence on 31 May 2013. Those who have already settled all their previous tax liabilities will be unaffected.
• From 2013, UK residents with funds in Swiss banks will have a choice; they can either authorise a full disclosure of their affairs to HMRC or face a new withholding tax of 48% on investment income, 40% on dividends and 27% on capital gains.
• There will be a new information sharing provision whereby HMRC will be allowed to request account details of up to 500 people a year who they suspect of tax evasion, whether the individual authorises their bank to respond or not. This figure of 500 is expected to increase if appropriate. The enhanced information exchange terms will include an undertaking that the Swiss authorities will provide information, if possible, of where funds have been transferred if they have been removed from Switzerland. 

In common with previous disclosure facilities, not all individuals will be able to participate in the deal. In particular, the following individuals will be excluded:

• Those who are under civil or criminal investigation by HMRC when the deal is signed;
• Those who have concluded a civil investigation in the past and have had their tax liability significantly amended as a result;
• Those who have a criminal conviction in respect of tax evasion;
• Those who were contacted as part of one of the earlier voluntary disclosure schemes, such as the offshore disclosure facility  or New Disclosure Opportunity; and
• Those who have relevant assets in Switzerland arising from non tax-related criminal activity or Missing Trader Intra-Community fraud.

The agreement is planned to come into force in January 2013, following scrutiny by Parliament and after ratification procedures in Switzerland are complete.As a sign of commitment, Swiss banks are making an upfront payment from Switzerland to Britain of CHF 500m (approximately £385m).

The favourable terms of the Liechtenstein Disclosure Facility (LDF) remain unchanged. Therefore, from 2013, UK taxpayers with undisclosed funds in Switzerland wishing to legitimise funds will have to decide between using the LDF or a one off deduction under the Swiss Deal.

It is therefore very important for individuals that may be affected by these arrangements to seek professional advice.  We are able to offer a confidential initial meeting without obligation to proceed and on a no-names basis if necessary, to discuss their specific circumstances.

Please contact Dawn Register for further information or advice.