UK investors face double tax trouble over Swiss accounts

Lisa Smith, BA (Hons), CeFA

UK taxpayers with a Swiss bank account face double trouble with their income and assets from January 1, 2013, unless they take steps to sort out their financial affairs.

Even if they tell HM Revenue & Customs about their accounts with Swiss banks, they must authorise their banks to disclose personal financial details to the taxman as well.

If they don’t, the risk is HMRC will expect tax paid on any earnings or disposal of assets in the UK, while the banks will collect a withholding tax.

How the tax deal works

So, for UK taxpayers with Swiss bank accounts, here’s a quick guide to how the tax agreement works:

  • The deal between HMRC and Swiss talks about ‘paying agents’ , which is a broader terms than banks and covers stocks, securities, shares, precious metals, options and derivatives as well as cash and other valuables stored in banks
  • If a Swiss bank is not authorised to tell HMRC account details, a one-off payment in respect of unpaid tax for past years will be paid on the assumption none has been paid before.
  • Taxpayers who have told HMRC about their finances need to make sure any information sent by their bank matches their disclosure
  • Bank payments will be anonymous
  • Taxpayers aiming to beat the deadline by shifting their cash and assets further afield should be aware the agreement covers tipping HMRC off with a list of the top 10 offshore centres receiving transfers from Swiss banks
  • The agreement applies to trusts, executors and beneficiaries as well as direct account holders.
  • Unless the bank is authorised to disclose account details within a year of a client’s death, the bank may pay a 40% withholding tax to ‘mirror’ UK inheritance tax to HMRC.

The UK is not the only country pressing ahead with tax deals with Switzerland – Germany, Austria and Greece are at various stages of negotiation.

Don’t forget FATCA

Greece in particular is determined to push for a quick settlement as the government suspects the country’s wealthiest families have transferred billions of euros of assets in to secret accounts in recent years.

The USA is also imposing the controversial FATCA (Foreign Accounts Tax Compliance Act) on Switzerland, demanding financial institutions handover details of  accounts held by US citizens – threatening withholding taxes and fines on non-compliance.

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