UPDATE: Please see Eaves and Co’s Swiss Treaty Brochure for full details of the treaty
After much anticipation, details of the treaty between Swiss Federal Department of Finance and the UK Treasury aimed at tackling offshore tax evasion were announced on 24 August 2011.
Broadly speaking there will be two routes to go on under the agreement:
1) Retain anonymity via making an initial one off payment and paying withholding tax from 2013 or;
2) A voluntary disclosure to HMRC regarding Swiss assets and associated income
If option one is chosen there will be an initial one-off deduction of between 19% and 34%, on a UK resident’s existing Swiss accounts which were open on 31 December 2010 and remain so on 31 May 2013. This deduction is in order to settle past tax liabilities.
The rate charged equation accounts for the number of years of investment and the account movement. It is estimated by the Swiss Banking Association that the applicable rate will be 20-25% for most taxpayers.
In addition to this from 2013 there will be a withholding tax of 48% on interest income and 27% on Capital Gains, with the level of withholding tax for dividends to be announced later.
Alternatively the UK resident can make a full disclosure of untaxed Swiss income and gains to HMRC. HMRC will then seek unpaid taxes, interest and penalties from this disclosure.
If a disclosure is made, the accounts of UK taxpayer will not be subject to the one off charge and future withholding tax.
A disclosure under this option could be made under the Liechtenstein Disclosure Facility (LDF) which may offer reduced penalties.
It is clear then that this deal will have a big impact on UK residents with a Swiss account. Possibly affected taxpayers should consider which option might be most beneficial. This will require calculating the effect of both options on their funds. This initial assessment exercise will be very important and may not be straightforward.
If you would like to discuss the impact of the treaty further or would like help deciding which option to choose please feel free to contact us in our Leeds office.
- UK Swiss Treaty Draws Closer (eavesandco.wordpress.com)