29 Aug 2011
UK Swiss bank account holders could move to other offshore financial centres
Anthony Thompson, head of private client, Lawrence Graham LLP:
"The new UK-Swiss tax deal promises to bring in much needed revenue to the Government's coffers from individuals who have been avoiding disclosure for perhaps many years. A possible side effect of the proposals, however, may be to encourage non-UK domiciled Swiss account holders who pay UK tax on the remittance basis to move their accounts from Switzerland to other offshore financial centres, such as Singapore and Hong Kong. Such individuals only pay UK income and capital gains tax on monies arising in or brought to the UK and, in many cases, will owe no UK tax on the money they hold in Swiss accounts. The statement made by the Swiss Federal Department of Finance indicates that the agreement contains special rules for non-UK domiciled individuals. The statement released by H M Treasury, on the other hand, made no mention of separate rules for non-doms. In any event, unless such rules enable non-UK domiciled individuals to avoid disclosing the existence and details of their Swiss bank accounts to the UK authorities, to maintain confidentiality over their offshore assets many of them may prefer to move their accounts out of Switzerland before the deal takes effect in 2013.
"Under the deal agreed between the Swiss and UK authorities, there will be a one-off charge of between 19% and 34% of a Swiss account owned by a UK resident which will be taken by the Swiss bank and given to HMRC in 2013. The exact percentage will be determined by the size of the account and how long it has been held. Going forward, there will be an annual "withholding tax" deducted from interest (at 48%), dividends (at 40%), other income (at 48%) and capital gains (at 27%). There is also to be an up-front payment from Switzerland to Britain of CHF 500m.
"For reasons relating to Swiss banking secrecy, anonymity of bank account holders will be maintained as payments will be deducted and made by the bank without individual accounts being revealed to HMRC. Account holders will receive certificates stating they have paid a charge and will be able to reclaim monies from HMRC if they consider they have been overcharged. This will, of course, require them to disclose details of the accounts in question to HMRC. The one-off levy and annual tax can be avoided if full disclosure is made to HMRC. This is where the issue for tax compliant but privacy-conscious non-UK domiciliaries arises.
"Under the deal, the UK Government will also be able to request bank account details for up to 500 people a year from Swiss banks, which information must be disclosed by the banks.
"For those UK individuals who have undisclosed UK tax liabilities in respect of Swiss bank accounts, there will be a choice to be made between maintaining their anonymity in respect of their Swiss bank accounts and paying the one-off levy (and future withholding taxes) or disclosing their accounts to HMRC, possibly as part of the Liechtenstein Disclosure Facility, and perhaps paying less in back taxes and penalties under that regime."