HMRC has upped the ante for British taxpayers with holdings in Swiss bank accounts by increasing the one-off tax payment to 41% of their value regardless of the amount of tax due.
The agreement starts from January 1, 2013, and is designed to make sure UK residents with undeclared holdings in Switzerland pay tax on any earnings.
The Swiss and UK tax authorities had signed an agreement limiting the tax to 34%, but the amount was increased after Germany struck another deal at the higher rate.
The tax charge is due on undeclared holdings – so if a taxpayer tells HMRC about investments or bank accounts in Switzerland the charge will not apply.
Instead, HMRC will want any past tax due paid, including fines and penalties.
The financial pain does not end at the withholding tax on investments in Switzerland:
- UK taxpayers must disclose Swiss bank accounts to HMRC or face more taxes deducted at source on income at 48%, dividends (40%) and gains (27%)
- Financial information about Swiss bank accounts can be requested by HMRC – with penalties on undeclared accounts ranging up to 150% of any tax due
- Swiss banks also have to levy a 40% withholding tax on any undeclared assets held by a deceased UK tax payer.
“Basically, HMRC is doing a thorough job of making Swiss banking anonymity seem highly unattractive,” said a report from accountants Grant Thornton.
“We are receiving more queries as a result of concern that UK taxpayers will have to disclose Swiss bank accounts to HMRC or suffer the punitive withholding deductions in lieu of past tax liabilities.
“UK taxpayers may have held their money secretly in Switzerland for the past 20 years, but to continue to do so without fully addressing the matter is likely to be a very costly option.”
The study also commented that many UK taxpayers with Swiss investments offshore since the Seventies when tax rates at home hit 83%.