HMRC have issued further details of their agreement with Switzerland. It will be remembered that accounts held in Switzerland by UK residents which are not disclosed to HMRC will be subject to a tax charge of between 19% and 34% depending on how long the account has been opened. It will apply to accounts which are in existence on 31 December 2010 and are still open on 31 May 2013. After that date there will be a withholding tax on subsequent income of 48% on income and 27% on capital gains.
HMRC say that people have three options. They can suffer the withholding tax; they can make a disclosure to HMRC (directly or by other means, for example through the Liechtenstein Disclosure Facility) or they can transfer the money somewhere else. The hope is that there will soon be nowhere where funds can safely be transferred. Apparently Switzerland will be supplying HMRC with the top ten destinations where funds leave Switzerland and obviously those territories will be targeted next.
There has been uncertainty regarding the treatment of non-doms and HMRC have confirmed that nondoms who are resident in the UK will not be subject to the withholding tax in Switzerland. However, HMRC are concerned about non-dom status being used to mask impropriety. They say
“if non-doms are not straightforward with us in relation to their tax affairs we will prioritise criminal investigations of people in that position. It is important that people know where they stand”.
It is not at all clear what this means – but I think I get the picture.
HMRC take the view – they may be right, but it sounds a bit extreme – that 80% of UK residents with money in Switzerland are concealing it fraudulently and there may be 20% who are “potentially innocent people”. I am not sure I am comfortable about the concept of “potentially innocent people” but it will be interesting to find out the accurate figures in due course. It is nice to know that if anyone does suffer withholding tax wrongly, HMRC say it will be repaid to them.
The Swiss have agreed to provide a limited response to the exchange of information article in the double taxation agreement by giving HMRC information on 500 people, However, there is some kind of a ratchet
If HMRC is successful in identifying people who have additional tax liabilities, there will be an increase in the number about whom they will be permitted to seek information. If they are not successful in identifying people who have hidden money, the figure of 500 will be reduced.
Further details of the agreement will be published quite soon and there is some suggestion that some guidance will be issued to assist in the understanding of the agreement.