Save content
Have you found this content useful? Use the button above to save it to your profile.
AIA

Advisers warned over Swiss-UK agreement

by
11th Nov 2013
Save content
Have you found this content useful? Use the button above to save it to your profile.

A potential risk has emerged for advisers whose clients have opted for the withholding tax route under the Swiss-UK agreement, according to BDO.

The top 10 firm said that while advisers are honour-bound to urge their clients to make full disclosure of all offshore accounts, there will be some individuals who, unbeknown to their adviser, have made use of the withholding tax option under the Swiss-UK agreement to preserve their anonymity.

However that anonymity, it says, can only be maintained by continuing to deceive their adviser and HMRC.

Fiona Fernie, tax partner in BDO, explained: “Contrary to what many individuals believe, there is no clause of the Swiss-UK agreement that exempts UK resident Swiss account holders from declaring their Swiss assets to HMRC.

"Advisers must insist that their clients make a full disclosure of all offshore assets if they are aware that their client has them – for example, because the client has sent them a certificate of tax withheld under the Swiss-UK agreement. There may be no more tax to pay, but it is not ethical to act for a client who wishes to submit a tax return that is not complete,” she said.

In HMRC’s self assessment guidance for 2012-13, it says:
  • “Do include details of your Swiss income. This applies even if you have paid withholding tax on these amounts or authorised a Swiss paying agent to disclose the details to HMRC under the UK/Swiss Tax Cooperation Agreement, which came into force on 1 January 2013”
  • “Box 40 should also include details of any tax deducted from gains under the UK/Swiss Tax Cooperation Agreement which came into force on 1 January 2013. This is the case whether you opt to have the tax treated as a payment on account or the tax paid is deemed to clear your liability to UK tax in relation to the relevant gains”

Where a taxpayer does submit an inaccurate return by omitting details of his or her Swiss income, it is debatable whether HMRC would always be able to charge a penalty for an incorrect return where the correct amount of withholding tax was deducted.

Penalties for an inaccurate return are expressed as a percentage of the tax potentially lost, rather than a fixed amount.

However, the Swiss-UK agreement says that if all the conditions are met, “the relevant person shall cease to have any liability to United Kingdom taxes including interest, penalties and surcharges that are chargeable in respect of...” on the Swiss income.

Fernie added: “This is an untested area and may yet lead to court cases. Extra care is needed with non-UK domiciled clients because where they are correctly claiming the remittance basis there may still be a disclosure issue based on HMRC’s tax return guidance for 2012-13.

“This issue serves as yet another reminder that the UK/Swiss agreement does not give individuals the same level of protection and certainty as disclosure agreements such as the Liechtenstein Disclosure Facility – for both clients and their advisers.”

Back in January HMRC said it had received £342m from Switzerland as a result of the Swiss-UK tax deal which came into force on 1 January.

Tags:

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.