Swiss Agreement

Long regarded as a tax haven for the wealthy and a bastion of banking confidentiality, Switzerland signalled something of a change of direction in 2013

Signed on 6 October 2011, the Swiss-UK Tax Agreement for Co-operation came into being on 1 January 2013. The information on this page is no more than an outline of both the Swiss Agreement and the Liechtenstein Disclosure Facility (LDF), the detailed terms of which need to be carefully considered having regard to an individual’s personal circumstances and tax history.

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In general terms, the Swiss Agreement applies where any assets are held through or deposited with a Swiss bank or financial intermediary where the account holder or beneficial owner of the assets is a UK resident individual.

An account holder with a principal private address in the UK will be deemed to be UK resident for these purposes and a British national claiming to be resident outside of the UK will be deemed to be UK resident unless they can prove otherwise.

Swiss Agreement – How can we help?

inTAX has considerable experience of guiding clients through the options available under the Swiss Agreement and assisting in regularising past tax issues through either the LDF or other voluntary disclosure opportunities. The partners of inTAX are available to discuss specific circumstances and on a no-names basis if necessary.

Swiss Agreement – What you need to know

One-off payment

The agreement provided for a one-off payment on 31 May 2013 to clear past unpaid tax liabilities and/or a withholding tax from 1 January 2013 on income and gains. As an alternative to the one-off payment and withholding tax an individual whose bank account or investments are affected by the agreement could have opted for their bank or paying agent to provide details of their Swiss assets directly to HMRC. If this option was not taken then, by default, the one-off payment and withholding tax was deducted.

The one-off payment cleared those tax liabilities relating only to assets included in the figure of capital used in the payment calculation. In most cases, that was the account balance at relevant dates of either at 31 December 2010 or 31 December 2012. Amounts taken out of the account before the relevant date were not ‘cleared’ by the one-off payment. There were also separate rules for non-UK domiciled individuals.

The one-off payment was calculated in accordance with an agreed formula and was between 21% and 41% of the balance at the relevant date.

The withholding tax rate was 48% on investment income, 40% on dividends and 27% on capital gains received in the account.

A holder of a Swiss bank account or investments could authorise disclosure at any time in the future to avoid having withholding tax deducted for the following tax year.

Disclose Details

As part of the agreement, Swiss banks and paying agents wrote to their UK customers during 2012 to set out the options available to them and seek their instructions. In the lead up to 31 May 2013 the option still existed for customers to authorise the bank to disclose details of their Swiss assets to the Swiss authorities for onward transmission to HMRC and thus avoid the one-off payment and withholding tax charge.

The Swiss/UK Agreement is designed to be an effective mechanism for HMRC to recover previously unpaid UK tax liabilities in respect of assets located in Switzerland. Anyone who thinks they may have unpaid tax in relation to Swiss assets, should consider making a disclosure directly to HMRC. This will bring their tax affairs up to date and provide certainty that they are in order.

For a large number of UK taxpayers, the LDF is likely to be the most appropriate and cheapest route for bringing their affairs up to date. The key benefits of the LDF are a guaranteed immunity from prosecution, the use of a Composite Rate option (which can substantially the tax liability) and a streamlined disclosure process. However the LDF window will close on 31 December 2015 – so time is of the essence.

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