An agreement in principle has been signed by the UK and Switzerland to impose a permanent withholding tax on British funds hidden offshore from 2013…
A one-off tax is also to be collected from Britons who currently hold deposits in Swiss bank accounts.
The amount of one-off tax to be paid will depend on how long the deposit has been held in a Swiss offshore account. British tax evaders can expect to pay between 19% – 34% on their money held offshore.
From 2013 Investment income – which is profit made through any kind of investment vehicle – will become liable for ‘withholding tax’.
When set in place the new withholding tax will incur annual costs of between 27% – 48% – dependent on whether income from accounts is a result of interest, dividends or capital gains.
Switzerland is also to make an immediate payment of good will to HMRC, totalling £385m.
The UKs signing with Switzerland comes amidst HM Revenue and Custom’s battle to crack down on offshoreTax Evasion.
Now that the Swiss will be informing the UK about the movement of their bank accounts, the new agreement will allow HMRC to access funds they couldn’t reach before; making tax evasion and hiding money in offshore accounts practically impossible for UK tax cheats.
David Gauke, Exchequer Secretary to the Treasury, said:
“I am delighted that, through our constructive discussions with the Swiss Government, we have secured the best possible deal for UK taxpayers. “
The agreement in principle between the UK and Switzerland will collect billions of evaded taxes for the Revenue, with up to £5bn being received from Swiss authorities per year.
“The message is clear: there is no hiding place for tax cheats”, he added.
The new deal between UK and Swiss authorities is said to be in an attempt by Switzerland to hold onto UK taxpayers’ money, rather than see it make its way over to Leichtenstein.
But, UK tax evaders holding assets in Swiss offshore bank accounts may turn to HMRC’s existing Leichtenstein Disclosure Facility (LDF) to avoid paying higher tax penalties; if this option is still available to them.
The new Swiss one-off tax payment – set between 19%-34% – is considerably higher than the 10% tax penalty incurred by those declaring their assets through HMRC’s LDF tax amnesty campaign.
The Leichtenstein Disclosure Facility is currently available until the end of March 2015.
George Osbourne, Chancellor of the Exchequer, said in the Treasury’s press release:
“Tax evasion is wrong at the best of times, but in economic circumstances like this it means that hard-pressed law-abiding taxpayers are forced to pay even more. That is why this Coalition Government made it a priority to go after those who don’t pay their fair share.
“We will be as tough on the richest who evade tax as on those who cheat on benefits. The days when it was easy to stash the profits of tax evasion in Switzerland are over.”
Prior to the new agreement, UK tax evaders have been able to hold money in offshore bank accounts in Switzerland with complete anonymity.
As well as evading UK tax, money hidden from the Revenue has also been completely exempt from Swiss tax.
When ‘withholding tax’ comes into action in 2013, Switzerland will tax money held offshore by UK taxpayers in Swiss bank accounts and send the money directly to HMRC; the identity of Britons being kept anonymous.
HMRC will also be given the authority to request details for further tax investigations of 500 Britons who hold Swiss offshore bank accounts, per year.
Only those who come forward and fully disclose their offshore assets in Switzerland to HM Revenue and Customs, will be exempt from new Swiss tax measures.
Kevin Kinsella Jnr, of KinsellaTax, says:
“The Swiss withholding tax and one-off tax payment could be a tactic from HMRC to drive UK tax evaders towards the Liechtenstein Disclosure Facility, as this tax amnesty campaign has not been as successful as the Revenue first hoped.
“The new agreement between UK and Switzerland parliaments is another step in HMRC’s battle to crack down on tax evasion and Britons hiding money in offshore bank accounts.
“One only hopes that when a full standardised agreement is reached, all UK tax payers will be treated fairly.”
Lawful Brits who have already declared their Swiss income may need to further disclose their assets to avoid the imposed Swiss tax come 2013.
Those worried about deliberate or accidental underpayment of tax need professional advice. If a voluntary disclosure is made to HMRC, tax penalties will be less severe.
“I still want to see how the one-off payment is quantified, whether it is made up as part tax, part penalty. Confusing it to the LDF 10% penalty is misleading, as though that is all the LDF proposes.
“Income tax is still payable, other than pre 1999, in addition to the 10% penalty of the tax due and payable.
“I still await to read the actual agreement itself”, Kinsella added.
A full standardised agreement is set to be reached and signed by both parliaments later this year.
Have you commited tax evasion or been expected of tax evasion by HMRC?
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