Offshore Disclosure Facilities – LDF and Others

Eaves and Co have assisted a number of clients to make disclosures under the Liechtenstein Disclosure Facility (LDF) as well as advice for those affected by the UK-Swiss Tax Treaty.  HMRC have made clear that they continue to target offshore funds with more recent disclosure facilities in Jersey, Guernsey and the Isle of Man.

The LDF has been very successful for HMRC and they have even increased the expected yield from £1billion to £3billion.

We have written previously on the differences between the LDF and other disclosure facilities, in particular the more favourable guaranteed immunity from prosecution under the LDF.

A further, and often overlooked, aspect of the LDF which can be much more favourable than the other disclosure facilities is the ability to elect for a composite rate of tax rather than the actual rate.  This can mean significant savings where Inheritance Tax is involved.  As such, it might be worth those with funds in Jersey, Guernsey or the Isle of Man considering making a disclosure under the LDF where IHT is involved.

We would be delighted to hear from anyone seeking assistance in this area.

New Disclosure Campaign Targets Undisclosed Property Gains – Property Sales campaign

HMRC have announced the Property Sales campaign, a further new disclosure opportunity aimed this time at those with undisclosed taxable gains on residential property sales.

The disclosure campaign requires details of income and gains and the tax payable to be settled in full before 6 September 2013. After this date, HMRC will use the information they hold to target those who should have come forward under the campaign and did not do so.

HMRC states that reduced penalties will be levied on those who make a disclosure, but no firm details have yet been released.  At present, a penalty calculator on the HMRC website refers to a maximum penalty of 20%.

This campaign marks a further step in HMRC’s drive to get taxpayers to come forward over undisclosed income and gains, following the recent announcement of the Isle of Man Disclosure Facility, the longer running Liechtenstein Disclosure Facility, and the UK-Swiss Tax Treaty amongst others.

New Amnesty on Tax Penalties – Isle of Man Disclosure Facility Agreed with signing of Memorandum of Understanding

A memorandum of understanding between the Isle of Man Government and the UK’s HM Revenue & Customs was signed on 19 February 2013 setting out the terms of a new agreement and disclosure facility between the two countries.

The financial world becomes steadily more transparent.  Those with ‘hidden funds’ should beware.  The UK Government is using Money Laundering regulations to pursue previously untaxed funds.  The latest is with the Isle of Man Disclosure Facility.  The agreements signed include an automatic tax information exchange and the setting up of a disclosure facility.

The Isle of Man Disclosure Facility will run from 6 April 2013 to 30 September 2016 in order for taxpayers with relevant investments in the Isle of Man to bring their tax affairs up-to-date.

The terms set out in the Memorandum suggest that the Isle of Man Disclosure Facility will bear some similarities to the Liechtenstein Disclosure Facility, including an April 1999 cut-off date, a guaranteed penalty rate of 10% for returns due to be filed before April 2009 and a proposed single point of contact.

There are some key differences however, including the fact that there will be no guarantee against criminal investigation for tax related offences.

Further confirmation will be needed but it appears that a qualifying connection to the Isle of Man could be established if an interest in relevant property is established at any time before 31 December 2013.  This may mean that those with undisclosed income could transfer assets to the Isle of Man in order to take advantage of the beneficial tax treatment available.

Eaves and Co have successfully completed a number of disclosures under the Liechtenstein Disclosure Facility and will therefore be well placed to advise on the new Isle of Man Disclosure Facility if you are affected.

A copy of the Memorandum of Understanding can be found here, whilst the HM Treasury press notice can be viewed here.

UK-Swiss Tax Treaty – Swiss pay 500m Swiss francs over to HMRC

As part of the agreement between the UK and Swiss governments which recently came into force, the UK-Swiss Tax Treaty, in an attempt to reduce evasion in Swiss bank accounts the Swiss have paid over the equivalent of £342m to the UK.

The payment is the first instalment of the levy on bank accounts held in Switzerland by UK taxpayers, designed to cover arrears on previously unreported income.  The levy will apply to accounts in Switzerland unless the account holder allows the bank to disclose details to HMRC.

Current and future tax liabilities will be covered under the UK-Swiss Tax treaty and it is anticipated it will raise around £5bn in the next five years.  Prior years will be covered by the levy whilst future years will be covered by witholding taxes within the accounts in Switzerland.  In many cases, depending on the level of growth seen in the accounts, the levy under the treay can work out more expensive than other disclosure options, such as the Liechtenstein Disclosure Facility (LDF).

If you are interested in more details on the UK-Swiss Tax Treaty or the Liechtenstein Disclosure Facility, please contact us or take a look at our UK-Swiss Tax Treaty page.

UK Swiss Tax Treaty: Letter Received From Swiss Bank

As the UK Swiss Tax treaty came into force on the 1 January 2013 the majority of UK residents with Swiss bank accounts should now have received correspondence from their Swiss bank informing of their options.

Strictly speaking the banks have until the 1 March 2013 to notify individuals that they have been identified as a ‘relevant person’ for the purpose of the UK Swiss treaty.

Under the terms of the treaty a ‘relevant person’ must make a notification of their intended option by 31 May 2013 to their bank, however from our experience banks have been requesting that individuals make their decision earlier.

A relevant person is broadly a UK resident who is the beneficial owner of a Swiss bank account or deposit.  For the purposes of the one-off charge of 21%-34% residency is determined as at 31 December 2010.

If an option has been selected and notified to the bank then it will become irrevocable as at 1 January 2013 therefore it is important the options are given due consideration before any action is taken.

Options Available 

A)     To retain anonymity but accept a one-off charge of 21%-34% plus withholding taxes on future income and gains received

 B)      Alternatively in order to avoid the one off levy and annual withholding taxes it is necessary that individuals either:

1)      Provide certification to the Swiss bank that you are a non UK domiciled taxpayer using the remittance basis, such that you are not subject to UK tax on your foreign income/gains (albeit that you may be subject to a remittance basis charge), or

2)      Make a voluntary disclosure to HM Revenue and Customs (possibly under the LDF) and either:

i)          Close your Swiss bank account , or

ii)       Authorise the Swiss bank to provide your details to HM Revenue and  Customs by signing a voluntary declaration.

 3)      Close the account and move the funds to another jurisdiction prior to 31 May 2013.

Note however that banks have agreed not to assist individuals in this process and will not, as far as we understand, re-book an existing UK customer’s account through, for example, their Hong Kong branch or subsidiary.

This is a high risk approach for the following reasons:

i)    Similar agreements may be signed with other jurisdictions in the future.

ii)     Significant resources are being channelled into tackling tax evasion; higher penalties, up to 200%, as well as a higher tax bill can be expected than if taxpayers make a voluntary disclosure or use the Swiss or Liechtenstein arrangement.

iii)      Criminal prosecution is a greater possibility

iv)       If HMRC make contact before the Swiss deal comes into force or a voluntary disclosure is made then the taxpayer will face an intrusive investigation into their affairs as well as the associated professional costs.

 How Eaves & Co Can Help

 If you have received a letter from a Swiss bank and would like to discuss which option is best for you, please get in touch for an initial consultation with Paul Davison on 0113 244 3502 or pdavison@eavesandco.co.uk.

UK-Swiss Tax Treaty – Swiss Banks to Contact UK Taxpayers

Following the UK-Swiss Tax Treaty which was signed in October 2011, Swiss banks are now sending letters to all account holders that have a connection to the UK and may therefore be liable to tax charges under the UK-Swiss Tax Treaty.

Some banks have already posted the letters, whilst others will send them out during the next month or so.  Eaves & Co have already been contacted by concerned taxpayers in receipt of letters from their Swiss bank.

If you/your client receive letters regarding the UK-Swiss Tax Treaty then you should ensure that swift action is taken if you wish to avoid the one off levy in May 2013 and on-going withholding taxes.

Where there are undisclosed tax liabilities in issue then it will be necessary to consider whether to continue under the withholding system set out in the UK-Swiss Tax Treaty and retain anonymity or make a disclosure to HMRC – perhaps by taking advantage of the Liechtenstein Disclosure Facility (LDF).

It is important that clients with no undisclosed liabilities do not simply ignore the letters because the terms of the UK-Swiss Tax Treaty mean that the Swiss bank will need to receive confirmation from a UK tax professional certifying that the income has been disclosed to HMRC (or that the taxpayer is non UK domiciled and claims the remittance basis so disclosure is not required) before they can dis-apply the one off levy and annual withholding tax.

UK Swiss Treaty Draws Closer

switzerlandUPDATE: Please see Eaves and Co’s Swiss Treaty Brochure for full details of the treaty

A landmark taxation agreement between the UK and Switzerland will come into force on 1 January 2013.

It is important that individuals with undeclared assets in Switzerland give early consideration to the implications of the agreement to ensure that the best possible action is taken.

If you would like more information on the UK Swiss Tax Treaty and how Eaves & Co can help please click here.

UK Swiss Confederation Taxation Cooperation Agreement – Update

UPDATE: Please see Eaves and Co’s Swiss Treaty Brochure for full details of the treaty

As the timeframe moves closer for the UK Swiss Treaty to come into operation (1 January 2013) there have been some further changes to its terms.

On 18 April 2012 the UK and Switzerland exchanged letters with the outcome being that the minimum rate payable on capital through the treaty has been raised to 21%.  The upper rate also being raised and to 41%.

switzerland

Switzerland (Photo credit: siette)

Clearly this makes the UK Swiss Treaty even less palatable, with some commentators saying that only people wishing to remain anonymous should suffer the levy.  However, an initial professional consultation for anybody considering the matter remains a necessity in considering the alternative routes to redress of their tax position.