UK/Swiss Tax Agreement options
For any UK taxpayer who held an undeclared Swiss bank account, the UK/Swiss Tax Agreement provided a mechanism to regularise a taxpayer’s past tax liabilities. A one-off withholding tax based on the account balance as at 31 December 2010 will have been deducted for the past and a separate withholding tax was levied going forward.
When did it come into force?
The Agreement between the UK and the Swiss Confederation on cooperation in the area of taxation came into force on 1 January 2013 and the one-off withholding tax will have been deducted from accounts on 31 May 2013. The agreement terminated on 31 December 2016.
What happened next?
For those that opted to have the withholding tax deducted in 2013, there were two choices going forwards:
- To allow all future income and gains to be subject to an annual withholding tax deduction at the rates detailed below.
- Choosing to make a disclosure to HM Revenue & Customs, thereby preventing further withholding tax deductions.
How much is the withholding tax?
Various rates of tax applied depending upon the nature of the asset and income/gains generated.
The initial minimum rate was 19% which increased to 21% on 18 April 2012. The highest rate was 41% depending upon the type of asset.
From 1 January 2013 48% applied to interest, 40% dividends and 27% to capital gains.
What were the benefits of withholding tax?
The account holder could remain anonymous.
What is the current position?
From 1 January 2017 UK taxpayers were no longer able to prevent their information being shared with HMRC by paying a withholding tax. They should therefore have ensured that their tax affairs are up to date before HMRC commenced an enquiry resulting in higher penalties than if the income had been disclosed voluntarily.
Making a disclosure
Several disclosure facilities were previously available which have now been closed. The good news is that until 30 September 2018 there is still time to make a disclosure using the Worldwide Disclosure facility (WDF).
If you wish to discuss this or any other matter with a member of the team, please contact us.