In our briefing dated 5 February 2014 we noted that, following the introduction of the Agreement between the Swiss Confederation and the United Kingdom of Great Britain and Northern Ireland on cooperation in the area of taxation (the "Swiss Tax Agreement"), a number of incorrectly levied one-off charges were reported to HMRC.

Although the Swiss Tax Agreement provides that HMRC must refund a wrongly levied one-off charge, HMRC's position is that account holders should seek recovery from the paying agent (ie the bank) in the first instance. It is only where individuals have been unable to reach a solution through the paying agent that HMRC will consider claims for a refund of the one-off charge.

HMRC has requested that any affected individuals contact them with specified information. However, until recently HMRC did not have any process in place for considering these claims.

New adjudication process

HMRC has now established an adjudication process to determine whether a one-off charge was wrongly levied. HMRC will provide a refund where they determine that the paying agent has:

  • failed adequately to follow its due diligence procedures;
  • failed to take reasonable steps within the restrictions of its customer relationship to discharge its obligations under the Swiss Tax Agreement;
  • failed correctly to apply an element of the Swiss Tax Agreement, or
  • taken additional actions beyond that of reasonable due diligence that directly obstructed the relevant person from satisfying his or her obligations under the Swiss Tax Agreement.

The paying agent's actions must have been a determinative factor in the one-off charge being suffered by the relevant person.

HMRC has indicated that it will also provide a refund where the affected individual can demonstrate that they were not within the scope of UK taxation at 31 December 2010.

Exceptional circumstances

HMRC has also extended its discretion to offer refunds where it determines that the one-off charge was not wrongly levied. HMRC may agree to a refund where it considers that the continued application of the charge would cause significant hardship and result in a situation which a court would view as grossly unfair to the individual paying the charge, as a result of actions entirely beyond that person's control.

HMRC has stated that it is not possible to give an example of every type of case which falls into this category. However, it has made it clear that it willnot consider making a refund where people have changed their minds about paying the charge or because the charge is higher than the amount of any outstanding UK tax that the affected person owes.

Next steps

HMRC is contacting all the individuals who have requested a refund. Any individual who wishes to claim a refund will need to provide HMRC with certain information, including their personal details, evidence of the one-off charge, confirmation from the bank that it will not refund the charge and the disclosure of any historical unpaid UK tax that would become due should the one-off charge be reversed.

Account holders should consider obtaining legal advice before providing these details to HMRC.