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