The Government has signed an agreement with Switzerland that will see UK taxpayers with funds in Swiss bank accounts pay 48 per cent tax on investment income, 40 per cent on dividends and 27 per cent on gains.
The Government says the agreement aims to prevent people from concealing the proceeds of tax evasion. It is expected to secure £5bn of unpaid tax for the UK exchequer by 2015.
Under the terms of the agreement, existing funds held by UK taxpayers in Switzerland will be subject to a one-off deduction of between 19 per cent and 34 per cent to settle past tax liabilities.
Those who have already paid their taxes will not be affected. Swiss banks have agreed to make an up-front payment to Britain of £385m.
From 2013, a new withholding tax of 48 per cent on investment income, 40 per cent on dividends and 27 per cent on gains will be introduced for UK residents with funds in Swiss bank accounts.
This will be accompanied by a new information sharing provision which will make it easier for HM Revenue and Customs to find out about Swiss accounts held by UK taxpayers.
The new charges will not apply if the taxpayer authorises a full disclosure of their affairs to HMRC.
The agreement is expected to come into force in 2013, following scrutiny by Parliament and after ratification procedures in Switzerland are complete.
Chancellor George Osborne (pictured) says: “Tax evasion is wrong at the best of times, but in economic circumstances like this it means that hard-pressed law-abiding taxpayers are forced to pay even more. That is why this coalition Government made it a priority to go after those who do not pay their fair share.
“We will be as tough on the richest who evade tax as on those who cheat on benefits. The days when it was easy to stash the profits of tax evasion in Switzerland are over.”
In February, HMRC unveiled the Liechtenstein Disclosure Facility, which offers an effective amnesty on funds held in offshore accounts around the world, run in conjunction with the Liechtenstein government,
The arrangements mean after full disclosure, a fine of up to 20 per cent of tax due will be levied instead of 100 per cent, with tax interest and penalties only sought for the previous 10 years rather than the previous 20. The LDF can be used to declare overseas assets held in any jurisdiction.
PricewaterhouseCoopers tax partner Stephen Camm says research shows that the Swiss deal is likely to be less favourable for UK taxpayers than the LDF.
He says: “We conclude that the LDF is a better deal for UK taxpayers coming clean than the UK/Swiss treaty is likely to be, although taxpayers have to give up secrecy under LDF which they are not required to do under the UK/Swiss deal.
“Our sample shows total liabilities under LDF are, on average, around 10 per cent of overseas account balances in 2009/10. Those with assets in Switzerland will find their assets taxed at either 19 per cent or 34 per cent depending on how long the bank account has been in operation.”