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The UK/Swiss Tax Agreement – where are we now?

The first point to note is that the agreement is now in place having come into effect on 1 January 2013.

It sets out measures for UK taxpayers with Swiss accounts both in relation to future and past UK tax liabilities. All UK resident individuals with Swiss accounts are affected by the agreement which provides for HMRC to tax these funds.

From 1 January 2013

From now on, all UK account holders will either have to disclose a liability arising from the accounts each year or have tax withheld at source in relation to income and capital gains. In most cases individuals affected by the agreement will already have received notification of the agreement from the Swiss bank and have been asked which option they wish to choose. Anyone wishing to maintain some anonymity with regard to their account may prefer to simply have tax withheld. If no action is taken then withholding tax will now be applied automatically

Past liabilities – deadline 31 May 2013

Anyone with undeclared past liabilities now needs to bear in mind the deadline of 31 May 2013. A one-off regularisation levy will be taken from their account at that date to cover past unpaid tax liabilities, including interest and penalties. The levy is significant and can be up to 41% of the funds held. Furthermore in the event of death, a separate withholding tax of 40% on those assets will be deducted to satisfy inheritance tax. For some people they are facing the prospect of 81% of the funds held disappearing in tax.

Alternatively, appropriate disclosure of past liabilities is necessary and with the use of a special disclosure facility, the account can be regularised with less overall cost. The biggest benefit of this option is that it allows some freedom to plan for the future, both with regard to investment and inheritance tax.

To avoid the one-off levy, action needs to be taken by 31 May 2013.

Additional Compliance

The agreement applies to Swiss accounts of UK residents.  If you are not UK resident then you will need to provide a tax residence certificate in the other jurisdiction to satisfy HMRC of your residence position.
 

 

 

Date: 5th March, 2013
Author: Gill Tallon

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