Under the deal, UK taxpayers will be allowed to clear their arrears and keep their anonymity by making a one-off payment which will be deducted by the Swiss bank from the balance in the account in 2013 and passed over to HMRC.
Accounts held by UK taxpayers in Switzerland will be subject to a one-off deduction of between 21% and 41% to settle past tax liabilities, as long as the account was open on December 31 2010 and is still open on 31 May 2013. The deduction could settle income tax, capital gains tax, inheritance tax and VAT liabilities (but not corporation tax or stamp duty) with regard to the funds in the account.
If a UK taxpayer chooses instead to instruct the bank to disclose details of the account to HMRC, the UK tax authority will seek unpaid taxes with relevant interest and penalties. Once the agreement is in force and the initial payment is made, UK taxpayers can either make an annual disclosure or pay an annual withholding tax.
The agreement is set to facilitate exchange of information between UK and Switzerland for any new assets deposited in Switzerland. HMRC will be allowed to request information for individuals who they suspect of holding a Swiss bank account. HMRC will not need to name the bank but will be obliged to offer the name of the person and the reason for their request. The number of requests will be up to a maximum of 500 per year, for the first three years, according to the agreement.
The UK-Switzerland agreement also introduces an inheritance tax levy on the death of the relevant person unless their personal representatives authorize the Swiss bank to disclose the account details to the UK. The levy is 40% of the relevant assets at the date of death.
Industry experts said that the high withholding tax rates in the UK-Switzerland agreement is likely to nudge more individuals toward the Liechtenstein disclosure facility (LDF), which was likely to be the cheaper option.
Commenting on the agreement, KPMG said in a statement that t is likely that many UK persons with Swiss assets will now be contemplating a disclosure (or withholding). For a large number of UK taxpayers the LDF is still likely to be the most appropriate (and cheaper) route. The key immediate benefits of the LDF seem to be a guaranteed immunity from prosecution, the use of the composite rate option (which from our experience to date can reduce the size of the tax liability substantially), being able to resolve worldwide undisclosed assets and achieving certainty for the future. /p>
