Switzerland to tax black money in UK citizens' secret accounts

Switzerland to tax black money in UK citizens' secret accounts

According to a BBC report, the deal could see between 3 billion pounds and 6 billion pounds a year being handed to HMRC (Her Majesty's Revenue and Customs) by the Swiss authorities.

The agreement is a part of the HMRC's latest efforts to track down and tax money hidden in offshore bank accounts.

It follows a similar deal agreed earlier this month between Germany and the Swiss authorities.

UK officials said the agreement was a landmark one.

"The world has changed for tax evaders," said Dave Hartnett of HMRC.

"A few years ago, nobody would have anticipated that we would conclude an agreement with Switzerland to tackle tax evasion. We will secure significant sums of tax that some had thought we would never see," he added.

Meanwhile, David Gauke, the Exchequer Secretary to the Treasury, said, "The historic agreement will enable us to collect billions of pounds from those who have for too long evaded their responsibility to pay UK tax by abusing Swiss banking secrecy."

For decades, Swiss banking laws have provided complete secrecy to foreigners operating bank accounts there.

The account holders have been able to use the accounts to hide money from the own tax authorities, without even having to pay any Swiss tax.

From 2013, the Swiss will tax the bank accounts of UK citizens and transfer the money directly to the Treasury, but without revealing the identity of the account holders.

The UK citizens' accounts in Swiss banks will be taxed at between 19 per cent and 34 per cent on the principal sum hidden, depending on how long the account has been running.

The Swiss have agreed to make an initial downpayment of 500 million Swiss francs toward the tax liabilities of UK citizens with Swiss bank accounts.

From 2013, the account holders will also face an annual levy of between 27 per cent and 48 per cent on the income from their accounts, depending on whether it has arisen as capital gains, dividends or interest.

The UK authorities will also have the right to request the banking details of 500 UK individuals a year for further investigation.

Chas Roy-Chowdhury of the Association of Chartered Certified Accountants (ACCA) said the deal was "very innovative".

"This is a wake-up call to tax dodgers and will flush some of them out of the woodwork," he said.

UK citizens will only be able to avoid the new tax measures in Switzerland if they come forward and make a full disclosure of their finances there to HMRC.

Ronnie Ludwig, of accountants Saffery Champness, said the UK's agreement was a huge step forward in the search for untaxed income offshore.

But he said people hiding their money in Switzerland would still be getting away with substantial tax evasion.

"The Swiss agreement is a pragmatic move by the UK Treasury that will certainly help bring an immediate boost to tax revenues, but it is a quick fix measure," he said.

"It means some tax revenues from secret accounts will flow into Treasury coffers, but the fact remains that only a small proportion of the total tax that would have been due on the money stashed away in secret accounts in Switzerland over the years can be recovered under these latest proposals," Ludwig added.

Since 2007, HMRC has been targeting people in the UK who have failed to pay tax on money kept in offshore bank accounts.

In 2009, the UK authorities struck a deal with the government of Liechtenstein, a notorious tax haven.

If UK citizens hiding cash there confess, they will face penalties amounting to just 10 per cent of the tax they have evaded.

They will still have to pay their back-taxes and interest, going back up to 10 years.
As many as 5,000 British investors are thought to have stashed an estimated 3 billion pounds in secret accounts in Liechtenstein.

Those who do not take advantage of the disclosure "opportunity", which runs to the end of March, 2015, will face fines amounting to 200 per cent of their unpaid tax, as well as back-taxes and interest.

Chris Oates of Ernst and Young said: "As a side effect of today's announcement, we could also see an increase in people moving their assets to Liechtenstein rather than paying up to the Swiss authorities."

"The Liechtenstein Disclosure Agreement only requires a back payment of taxes from 1999/2000 onward, rather than the total value of assets held in Switzerland.

"This could prove a more cost-effective way to resolve past tax liabilities for UK individuals than the new Swiss arrangement," he added.

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