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HMRC warning letters to Swiss Account Holders

Swiss Letter_TaxAgility Accountants LondonHM Revenue and Customs (HMRC) recently sent out their first batch of 6,500 warning letters to UK holders of Swiss bank accounts. These warning letters, sent at the end of September, advised Swiss account holders that they have a six week deadline to ensure they are compliant with the new UK tax laws which came into effect in January 2013.

Affected taxpayers are advised to consider using the Liechtenstein Disclosure Facility to bring their tax affairs to order.

What is the Liechtenstein Disclosure Facility?

The Liechtenstein Disclosure Facility (LDF) is designed for UK taxpayers who may have irregularities regarding a bank account, investment or financial structure such as a trust, in Liechtenstein.
It provides UK taxpayers with an opportunity to disclose any irregularities and benefit from the HMRC’s most generous terms, including:

  • A minimal penalty – a flat penalty charge of 10% on any tax liability to the 2008/9 tax year and 20% on tax liabilities arising thereafter; and
  • A limited time period for disclosure – under normal circumstances, the HMRC can go back 20 years, however using the Liechtenstein Disclosure Facility, the HMRC will only seek tax for the period from 6 April 1999.

The LDF is designed for UK taxpayers with holdings in Liechtenstein, however it can be used even if funds are not held in that jurisdiction. Individuals who do not currently have assets in Liechtenstein can open a bank account in the principality and thereby may qualify to participate in the LDF.
The LDF scheme was originally due to end in March 2015, but it has been extended until 5 April 2016 due to high demand.

For further information, please refer to our LDF blog posted earlier this year.

What is the UK Swiss Tax Cooperation Agreement?

The new information-sharing agreement was made between UK and Switzerland to make it easier for HMRC to find out about Swiss offshore accounts held by UK taxpayers. The agreement came into force on 1 January 2013 and covers undeclared Swiss bank accounts held by UK residents. When the agreement was introduced, the Treasury estimated it would raise £3.2bn, however recent figures released by HMRC show that the Swiss agreement has raised only £747m to end August 2013.

In summary, here are a few key points of the UK Swiss Tax Cooperation Agreement:

  • Individual accounts will be subject to a one-off levy of between 21% and 41%, if accounts were open between 31 December 2010 and 31 May 2013. The final amount of the levy is dependant on a number of factors including the length of time the assets have been held in Switzerland and is intended to settle ‘historical tax liabilities’.
  • Account holders could be subject to a new withholding tax of 48% on investment income and 27% on gains, if they do not authorise full disclosure of information to HMRC. In addition, if account holders fail to disclose their affairs fully and pay the taxes due, penalties of up to 150% of the amount owed could be imposed.

 

If you are a recipient of one of the HMRC warning letters to Swiss Account Holders or have an account in Switzerland, please feel free to contact us to assess if you are tax complaint and discuss your next steps on 020 8780 2349.

This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.

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