Swiss banks agree to pass tax to UK
A “landmark” deal between the UK and Switzerland governments to tax money held by British citizens in Swiss bank accounts will increase demand for the Lichtenstein Disclosure Facility (LDF), reports Nick Huber.
Under the Swiss-UK tax deal, which comes into force in 2013, the Swiss will tax the bank accounts of UK citizens and transfer the money directly to the Treasury, but without revealing the identity of account holders.
A one-off levy of between 19% and 34% will be applied to all Swiss accounts held by UK residents to settle tax liabilities. The rate will depend on how long the account has been running. As a gesture of “good faith” Swiss banks will make an up-front payment from Switzerland to Britain of 500m Swiss francs (£383m), the Treasury said.
Taxes on future income will be withheld at a rate of 48% per cent, in line with the top 50% income tax rate for Britain’s highest earners.
From 2013 the account holders will also face an annual levy of between 27% and 48% on the income from their accounts, depending on whether it has arisen as capital gains, dividends or interest.
John Cassidy, tax investigation and dispute resolution partner at PKF, said that many Britons with Swiss accounts would probably be better off using the two-year old LDF, rather than waiting for the Swiss withholding tax. Deciding between the two options can be quite complex, however, so tax advisers will need to “do their homework” on the two options before advising clients, he said.
Tax experts generally welcomed the Swiss-UK tax deal. Phil Berwick, director at McGrigors, a law firm that advises clients on tax, said: “Taxpayers are running out of safe havens to hide their assets. Very few of the tax havens who have so far resisted opening up to the Revenue are what you would call ‘stable’ countries. Nicaragua may well be an opaque tax haven - but few taxpayers would feel comfortable stashing their money there.
“The million dollar question for the Revenue is whether taxpayers with assets in Switzerland will now come clean on undeclared assets in other offshore accounts. Given taxpayers with Swiss accounts will remain anonymous, there’s a risk that they will adopt a ‘business as usual’ approach to their assets in other jurisdictions.”
The Swiss-UK tax deal has some critics, though.
Richard Murphy, director of Tax Research UK and anti-poverty campaigner, said that the UK government should have pressed Switzerland to agree to automatically send it details of Britons with income received from Swiss bank accounts. This would have been possible under the European Commission’s revised Savings Taxation Directive, Murphy said.
Writing in his blog, Murphy said: “[The revised Savings Taxation Directive] deal would have ensured we’d have got all the information we needed to demand all the tax due by those who have been criminally evading their tax bills by hiding funds in Swiss banks that have been deliberately and knowingly helping them to do so.”