Fintech meet up
Out-Law News | 28 May 2014 | 10:07 am | 2 min. read
Jason Collins of Pinsent Masons, the law firm behind Out-Law.com, said that the list would allow HM Revenue and Customs (HMRC) to plan its next moves against UK taxpayers who are using overseas tax havens in order to evade tax. As part of a tax information agreement between the UK and Switzerland, Swiss banks will provide HMRC with a list of the 10 most popular offshore locations to which UK taxpayers have moved money, as well as the number of UK nationals who have moved their money from Switzerland to each location, he said.
"This is another tightening of the noose on tax evaders," Collins said. "HMRC is aware that money that could have been declared under the UK/Swiss treaty has been flooding out of Switzerland instead - and they are determined to track that money down."
"The Swiss/UK treaty has already dramatically increased the amount of information that HMRC has on possible tax evaders. The 'hit list' of top 10 countries will be another key piece of the jigsaw. HMRC will now know exactly where to focus its efforts," he said.
An agreement between Switzerland and the UK in relation to undeclared Swiss bank accounts held by UK residents came into force on 1 January 2013. On this date, individual accounts became subject to a one-off levy of between 21% and 41% as long as the account was open between 31 December 2010 and 31 May 2013. The amount of this levy, which was intended to settle "historical tax liabilities", depended on various factors including how long the assets had been in Switzerland.
Other terms of the agreement include a new information-sharing provision designed to make it easier for HMRC to find out about Swiss accounts held by UK taxpayers. Account holders that do not authorise full disclosure of their information to HMRC will be subject to a new withholding tax of 48% on investment income and 27% on gains, while HMRC will be able to seek any unpaid taxes with relevant interest and penalties where appropriate.
HMRC believes that four out of five UK residents with a Swiss bank account are guilty of tax evasion, according to Collins. It also originally estimated that the agreement could generate in excess of £4 billion in additional tax, although the Swiss Bankers Association has since suggested that the total will be less.
Collins said that there were very few options remaining for those using offshore bank accounts to evade taxes, particularly given the move towards automatic exchange of information between many countries including those previously considered to be tax 'havens'. Evaders should instead take advantage of the current generous tax 'amnesty' offered by HMRC under its Liechtenstein Disclosure Facility (LDF), he said.
"The tide has turned in favour of tax authorities such as HMRC," he said. "The last major hold-out countries like Switzerland and Singapore, who have agreed to adopt automatic exchange of information, have come away from the negotiating table clearly lined up against tax evaders."
"It's essential that those with unpaid taxes due on their overseas 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 LDF to work, they need to 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 strict liability offences being dished out like parking tickets, the risk-reward ratio is increasingly stacked against the evader," he said.
The LDF is a disclosure process designed for taxpayers with UK tax irregularities connected to a bank account, investment or structure in Liechtenstein. Individuals who do not currently have assets in Liechtenstein may now be able to bring themselves within the scope of the scheme by acquiring a bank account within the principality. Although tax, interest and penalty will still be charged under the LDF, HMRC will only seek tax for the period from 6 April 1999 rather than the normal 20-year period. There is also some immunity from prosecution for tax offences.
Fintech meet up