UK sign amendment to Swiss tax disclosure facility

The UK has signed an amendment with Switzerland supplementing the tax agreement of October that sees British taxpayers with Swiss bank accounts pay between 19pc and 34pc on their assets to settle past liabilities.

The new Protocol of Amendment, signed by Michael Ambühl, State Secretary in the Federal Department of Finance, and Dave Hartnett, Permanent Secretary for Tax, HM Revenue & Customs, will not radically change the original agreement, however interest payments will not be excluded from the agreement’s scope.

At the same time, it will be ensured that UK taxpayers can discharge their tax liability on interest payments.

Inheritance is now also covered by the agreement in order to eliminate a loophole. In the case of inheritance, the heirs must consent to either collection of a tax or disclosure.

Once implemented, the agreement will permit UK residents to retrospectively pay tax on existing bank relationships in Switzerland, either by making a one-off tax payment or by making a full disclosure of their banking affairs to UK authorities. An anonymous lump sum payment will be possible providing that the account in question was open on December 31, 2010 and remains open on May 31, 2013.

The amendment has been signed to iron out some parts of the agreement which were seen as not being compatible with EU law following concerns from the EU Commission. These contentious parts have now been removed.

According to the original October agreement all assets held in Swiss accounts will be subject to a tax charge of between 19% and 34% dependent on the asset in question and determined by the duration of the client-bank relationship and the accounts final balance.

Crucially the agreement also allows for a final withholding tax to be levied on any future investment income and capital gains of UK bank clients in Switzerland. Under the agreement investments will be liable to a 48% tax, while a 27% charge will be apply on capital gains.

According to the UK Treasury these charged will settle all income tax, capital gains tax, inheritance tax and VAT liabilities related to the funds in question.

Once again the payments will not apply if the taxpayer offers HM Revenue and Customs full disclosure.

Perhaps most importantly, the agreement will also allow HM Treasury to submit requests for information from the Swiss, with the aim of preventing future deposits in its banks from UK residents.

A “safety net” has been implemented in the deal which will see any such requests limited to a name, and not necessarily that of the bank in question and the Treasury will only be allowed to submit up to 500 requests a year.

The Treasury says this agreement goes further than the information exchange provisions of the existing double tax treaty.