After a short delay earlier this year the UK and Swiss authorities have announced an agreement on the treatment of monies held by British Citizens in secret Swiss bank accounts. Still to be signed by both governments and ratified in Parliament, the agreement is expected to come into force in 2013.
Within the agreement, the authorities have tried to balance the privacy needs of individuals whilst maintaining the viability of the Swiss banking system. Key clauses within the treaty include:
• A one off payment by Swiss Banks of SFr500 million, to be repaid only if sufficient tax revenues are subsequently collected
• A one-off up front tax of between 19% and 34% based on balances held by British resident account holders on 31 December 2010. The actual tax rate is to be calculated after taking into account variables such the age of the account and the deposits made since 2003.
• A withholding tax of 27-48%, with the rate being dependent on the type of investment vehicle and income source. These rates will be set at a slightly lower rate than top tax rates within the UK
Perhaps the most interesting feature of the agreement is the preservation of anonymity for bank account holders. The Swiss government are to collect the taxes and forward them to HMRC without revealing identities. However, in recognition of the need to crack down on tax evasion, HMRC will have the right to request information on up to 500 individuals each year. UK tax payers also have the right to voluntarily disclose their Swiss accounts which will then become subject to standard UK tax rates.
The UK tax authorities hope that this new treaty will remove one tax evasion route. There are no definitive figures available on the expected tax gain once the agreement comes into force. However, current estimates are that the initial up front tax will raise in the region of £5billion. How much the withholding tax raises will partly depend on the future investment decisions of those with money currently invested in Switzerland.
As tax mitigation specialists Newshams are able to give advice on how tax may affect any private or business transaction and how to put in place an effective tax strategy.
Contact us now on 020 7470 8820 and ask to speak to a tax adviser about how we can reduce your tax costs or e-mail us at email@example.com and we’ll get straight back to you.
30th August 2011