Advisers cold shoulder Swiss tax deal
The tax deal signed between the UK and Swiss governments on 6 October is beginning to look more and more like a publicity stunt that will provide few practical advantages for UK taxpayers with Swiss bank accounts.
The first and potentially most difficult obstacle that may prevent Swiss banks from passing withheld tax to the UK government are noises from Brussels, where EU commissioners are said to be insisting on their right to ratify the agreement. In his weekly tax bulletin, Baker Tilly’s George Bull explained that because Swiss banks plan to handle the levy as a lump sum rather than a tax on named individuals, it will amount to an inter-governmental agreement for which EU ratification is required.
Removing the anonymity of individual tax evaders could bypass the need for specific EU approval of the agreement, as has been proposed for a similar deal with Swiss banks and the US government. If this were to happen, the expediency of the UK/Swiss agreement, which would allow tax to be collected while preserving Swiss banking secrecy, would be “distinctly tarnished”. “If the USA was to learn the names of American tax evaders, why shouldn’t the British tax authorities?” Bull said.
1. One-off levy of 19-34% to be levied in May 2013 on balances of Swiss accounts at 31 Dec 2010
4. Non-doms will need to pay Remittance Basis Charge in 2010-11 or 2011-12 and require "certificate" from lawyer or adviser.
5. Withholding will be due if arrangement is deemed to be abusive.
7. Future withholdings will be due.
At a conference hosted by BDO’s international private client network in London this week, advisers shared their concerns about the practicalities of the agreement, which applies to funds in Swiss accounts on 31 December 2010, on which the Swiss banks will withhold between 19 and 34% and pay it to the UK government in May 2013. Further withholdings will apply to interest (48%), dividends (40%) and capital gains (27%) from that date on.
For anyone holding assets offshore in several countries, the agreement will only apply to those assets held in Switzerland. The onus will be on the Swiss banks to identify clients who would be subject to the levy, but they face a big challenge to put reporting and control mechanisms in place to do this, explained Thomas Kaufmann from BDO’s Zurich office.
Switzerland does not have any trust laws, so the banks will have to start collecting more information to work out which international trust laws to apply.
Almost with a single voice, practitioners with experience of complex offshore arrangements agree that the LDF is a much better arrangement for those with dodgy offshore assets than what will be offered to Swiss account holders (who can also opt for the LDF).