A recent High Court ruling found HMRC was not obliged to refund a 'windfall' seized from a taxpayer's Swiss account.
In Vrang v Revenue And Customs [EWHC 1055] taxpayer Karin Vrang lost the dispute concerning the UK-Swiss agreement, a tax deal between the UK and Switzerland aimed at collecting unpaid tax from undisclosed accounts while preserving bank secrecy in the country. Account holders who did not opt to come forward were given the opportunity of maintaining anonymity in return for their bank paying a levy of between 21% and 41% of the value of the account.
Prior to moving to the UK in 2005 the Swedish banker worked in Switzerland and had three bank accounts with Credit Suisse.
She paid her Swiss earnings and pension into these accounts.
In 2012 her bank advised her that if she did not make a voluntary disclosure to HMRC about the bank accounts a payment would be taken. She failed to take action and the bank took £57,865, more than eight times the amount she owed, from the accounts to pass on to the Revenue.
Vrang claimed the tax was taken unlawfully and that just £7,000 was due.
Mr Justice Ouseley ruled that the Revenue was correct in its decision not to exercise discretion to refund her the difference between the bank levy and the amount actually owed.
The High Court said that “it was her fault that the levy was taken because she had failed to deal with perfectly clear correspondence”.
The judge later concluded: “HMRC did not fail to consider the circumstances of the claimant, but concluded that the policy should not be extended, which is another way of concluding that no exception to the exception should be made. That decision was made, taking into account all that the claimant had made known to them at the date of the decision challenged, and nothing subsequently explained has caused them to change their mind, though I think it evident that it has been considered. The decision is the outcome of the rational application of a rational policy.”
Vrang has said she will seek leave to appeal the judgment.
Back in 2013 advisers were warned about the risk clients faced over the UK-Swiss agreement. BDO warned at the time that while advisers were honour-bound to urge clients to make full disclosure of all offshore accounts, there would be some individuals who, unbeknown to their adviser, had made use of the withholding tax option under the Swiss-UK agreement to preserve anonymity.
According to the FT, between December 2014 and September 2016, HMRC paid refunds totalling nearly £2.9m to 129 individuals, but it refused refunds to 87 individuals totalling more than £2.3m.
About Robert Lovell
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