 Tax deal will close down Switzerland as a haven for tax avoiders
11 August 2011: Following a groundbreaking deal announced this week by the Swiss and German authorities to deal with tax evasion by German residents, it is expected that HM Revenue & Customs (HMRC) will announce a very similar deal covering UK-based holders of Swiss accounts in the coming days. The move will put UK-based account holders under new pressure to come clean on their taxes, according to PKF Accountants & business advisers.
Paul Clarke, tax partner and tax investigation specialist at PKF, explains: “HMRC has been trying to crackdown on offshore tax avoidance with a number of initiatives, but Switzerland was always the main prize. Swiss insistence on anonymity for account holders has been the stumbling block but it seems that the impending deal will get around that by allowing account holders to remain anonymous provided tax is paid to HMRC. UK-based account holders will be forced to pay tax or move their money to a much riskier location.”
Under the deal struck between the Swiss and German authorities, an upfront payment of around Euro 2bn (£1.7bn) will be paid direct to the German tax office by Swiss banks to cover tax that should have been paid in past years. The banks will then claw this back from account holders, with each paying over between 19% and 34% of the balance in their account (depending on the age and size of the account). German account holders who do not want to pay the charge can declare the account to the German authorities – presumably under some form of tax amnesty – and pay their tax arrears personally. In future years, Swiss banks will deduct a withholding tax at source (at the normal German flat rate on interest) from income earned on the Swiss deposits and pay it over to the German taxman.
Paul Clarke says: “It is expected that the UK-Swiss deal will be very similar, although the withholding tax rate on future income could be much higher for UK account holders as interest income is taxed an individual’s marginal rate – i.e. up to 50% - in the UK. Paying this much just to retain anonymity could prove to be too high a cost for many, and account holders will need to consider their options carefully once the full details become available. In some cases, it may be that coming clean on past tax irregularities using the Liechtenstein Disclosure Facility will be a cheaper option, so we could see a move towards creating a financial presence in Liechtenstein.”
“It will be interesting to see if the UK-Swiss deal is as advantageous as the current UK-Liechtenstein agreement. Will it offer immunity from prosecution and give users the ability to disclose worldwide irregularities?”
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For further information, please contact: Andy Konieczko, 020 7065 0537, andrew.konieczko@uk.pkf.com or Jane Soares, 020 7065 0135, jane.soares@uk.pkf.com
Notes to Editors:
1. PKF (UK) LLP is a leading firm of accountants and business advisers with more than 1,500 partners and staff operating in 23 offices in the UK mainland firm, incorporating a wholly-owned financial planning company and associated offshore practices. The firm specialises in advising growing and entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic. The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm’s web site is www.pkf.co.uk
2. PKF (UK) LLP also offers financial services through its FSA authorised company, PKF Financial Planning Limited. PKF (Isle of Man) LLC is a limited liability company registered in the Isle of Man. PKF (Channel Islands) Limited is incorporated in Guernsey.
3. PKF (UK) LLP is a member firm of the PKF International Limited (PKFI) network of legally independent member firms. The PKFI member firms have around 2,200 partners and more than 21,000 staff in around 125 countries.
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