The Swiss/UK Tax Cooperation Agreement applied in the UK from 1 January 2013. The agreement was designed to be an effective mechanism for HMRC to recover previously unpaid tax in respect of assets located in Switzerland and to encourage people to disclose their affairs to HMRC.
UK residents with assets in Switzerland had two options under the terms of the agreement which were either:
This withholding tax was paid over to HMRC and allocated against a ‘client number’. Under the terms of the agreement the withholding tax paid was in effect a ‘payment on account’ in respect of the individual’s UK tax liability and was generally higher than the respective UK tax rates payable on the type of income and capital gains realised.
The agreement was terminated with effect from 1 January 2017 because the UK and Switzerland have both signed up to the Common Reporting Standard (‘CRS’). This means that UK residents who have assets in Switzerland who chose to pay the annual withholding tax to avoid having to disclose their affairs to HMRC, will now have to ensure their tax affairs are up to date as withholding tax will no longer be deducted from 1 January 2017. Therefore all the income and gains from any Swiss assets will need to be included on the individuals’ UK tax returns from 2016/17.
Under the terms of the termination agreement all UK resident individuals will have to provide a tax identifier number to the Swiss bank by 2018. It is now important for UK residents to bring their affairs up to date with HMRC in respect of any offshore assets they have which have not previously been disclosed. From 2018, Switzerland will be collating data to send to HMRC about UK tax payers which will be used to take action against those who seek to escape paying tax on offshore monies.
UK resident individuals who have assets in Switzerland which they haven’t disclosed to HMRC to date need to bring their affairs up to date as soon as possible. The disclosure to HMRC will only need to cover any income and gains realised since 1 January 2013 due to the payment of the one-off charge and credit will be given for the withholding tax paid already against any additional tax due (which in some cases may even give rise to a refund!).
If you have any queries relating to the above then please speak to your usual Forbes Dawson contact.
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