Deadline Looms For Swiss Banks To Tell UK Where Hidden Money Has Been Sent

Tom Burroughes

27 May 2014

Swiss banks have a 31 May deadline to tell the UK tax authority of the 10 most significant destinations to which money removed from suspected bank accounts in Switzerland has been sent, international law firm points out.

The accord between the UK and the Alpine state has been described as “groundbreaking” by the law firm. Meanwhile, as reported last week, the Swiss government is pushing ahead to enforce the automatic exchange of information agreements inked by Switzerland and dozens of other countries that were signed on 6 May in Paris. The move is seen as a further nail in the coffin of Swiss bank secrecy. And so far up to a third of Switzerland’s estimated total of over 300 banks have signed up to the Swiss-US accord on tax, under which Swiss firms state if they have, or have not, or suspect they have, broken US tax law. Last week, Credit Suisse announced it had pleaded guilty to aiding wealthy Americans in dodging taxes.

In the case of HM Revenue & Customs, the UK tax authority, it is expected to use the list provided by the Swiss government to help it accurately plan its next moves against UK taxpayers who are evading tax due on money they have sent to overseas tax havens, Pinsent Masons said in a note.

In August 2011, HMRC agreed with the Swiss tax authorities to ensure UK residents with funds invested in undisclosed Swiss bank accounts pay tax on those funds in the UK. A one-off levy of between 21 per cent and 41 per cent of the account balance was applied to Swiss accounts held on 31 December 2010 that remained open on 31 May 2013. From 2013 onwards, a rate of 48 per cent withholding tax will then be applied to investment income, 40 per cent on dividend income and 27 per cent on gains received in the account going forward.

The law firm points out that the treaty also requires the Swiss authorities to inform the UK of how many UK nationals have moved their money from a Swiss bank account to each of the listed countries.

“This is another tightening of the noose on tax evaders. HMRC is aware that money that could have been regularised under the UK/Swiss treaty has been flooding out of Switzerland instead – and they are determined to track that money down,” Jason Collins, head of tax at Pinsent Masons, said in a note.

For those yet to comply with the law, there are three remaining options, he said: shuffle money around the world but in the knowledge that other jurisdictions are tightening their grip; use an obscure banking centre with uncertain legal stability and protection, or accept the terms of the current HMRC tax amnesty under the terms of the Liechtenstein Disclosure Facility, to bring concealed money back into a regular account.

HMRC believes four out of five UK residents who held a Swiss account are guilty of tax evasion, the firm argues. The tax authority is also consulting on adopting a "strict liability" criminal offence for not declaring income derived from an offshore asset, which means HMRC would not have to prove intent to secure a conviction. (This idea has been criticized in some quarters for being an abuse of due process of law and a breach with English Common Law.)

“It’s essential that those with unpaid taxes due on their oversea accounts move quickly. If they do not come forward now they will find themselves facing fierce investigations by HMRC. HMRC know that for amnesty schemes, like the Liechtenstein Disclosure Facility, to work then they make some very public examples of those tax evaders who turn down the offer of an amnesty. With higher penalties for those who are caught and the risk of summons for strict liability offences being dished out like parking tickets, the risk reward ratio is increasingly stacked against the evader,” Collins added.