6,000 Swiss Account Holders Given One Month To Come Clean To UK Taxman


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As part of its concerted crackdown on offshore tax evasion, in the UK HM Revenue & Customs (HMRC) has announced that it is writing to 6,000 Swiss bank account holders to give them

As part of its concerted crackdown on offshore tax evasion, in the UK HM Revenue & Customs (HMRC) has announced that it is writing to 6,000 Swiss bank account holders to give them one last opportunity to fully disclose their accounts.

HMRC has received information on the accounts, and after comparing it to the holder?s tax returns believes that they may not have fully reported their income and gains. The taxman is offering them a window of opportunity to come forward and disclose all their tax liabilities. If they do not respond to the letter within 30 days, HMRC will immediately open a tax enquiry into their affairs.

It warns that anyone then found guilty of tax evasion faces a potential penalty of up to 200% and even criminal prosecution.

The bank accounts in question are in HSBC?s Geneva branch, and belong to both individuals and organisations. They are believed to include some high profile names.

The HMRC statement said that it is acting on information received under a tax treaty last year. It has however also been widely reported in that the names came from the infamous ?Falciani list?.

Herv?Falciani was an employee of HSBC Geneva, working in the IT department. After a fall out with his employers he made a disk containing information on 79,000 HSBC clients and handed it over to the French authorities in 2007. The list covered clients from 180 countries and has been passed to several tax departments in Europe as part of the exchange of information regime we are seeing nowadays. So HMRC received the details of the British taxpayers on the list (reportedly 7,000 names), the Spanish revenue received information on the Spanish residents on the list etc. Earlier this year it was reported that the Spanish authorities had already recouped around ?300 million as a result.

In the UK, HMRC has already begun criminal and serious fraud investigations into more than 500 individuals and organisations that hold HSBC Switzerland accounts. The latest letters are being sent to those who have not yet come forward or who are not already under investigation.

On announcing that HMRC would begin writing to UK residents and organisations holding HSBC Geneva bank accounts, Permanent Secretary for Tax, Dave Hartnett, said:

?This is not an amnesty. There are no special rates of penalty or interest for those who come forward voluntarily. This is an opportunity for those who have made errors in past returns to correct them.?

He went on to warn:

?The net is closing on offshore evaders. Don?t wait for HMRC to contact you. Come forward to us and make a full disclosure.?

One option for British taxpayers with undeclared assets in Switzerland (or elsewhere) is to regularise their affairs using the Liechtenstein Disclosure Facility (LDF). This began in 2009 and runs until March 2015 and allows people with unpaid tax linked to bank accounts and investments in Liechtenstein to settle their tax liability with much lower penalties than usual. Swiss bank account holders would have to open accounts in Liechtenstein to take advantage of the LDF.

While HMRC may not have offered any special rates to these HSBC account holders, it does tend to be more lenient with those who come forward voluntarily. Penalties are not usually more than 40% of the tax due ? depending on their circumstances – which is much lower than the 200% HMRC is threatening for people who do not respond to their letter within four weeks. The penalty would be besides paying back tax and interest.

This crackdown is just one of many measures HMRC is taking to recoup unpaid tax – such an aggressive approach is becoming commonplace for HMRC as well as other tax authorities in Europe. It is being conducted by HMRC?s Offshore Co-Ordination Unit, a new unit set up with government funding.

Giving account holders warning that they need to sort out their tax affairs immediately will help HMRC receive unpaid tax much quicker than if they had just gone ahead and investigated the 6,000 names. It is another pragmatic solution to enable the taxman to collect much needed revenue for the Treasury.

This latest announcement came just one week after the UK and Switzerland formally signed their new tax deal, whereby Switzerland will start to deduct both a retrospective (19% – 34%) and withholding tax (27% – 48%) from UK owned bank accounts. Holders will get to retain banking secrecy at the same time as paying tax to HMRC.

This deal is not due to come into effect until 2013. Many Swiss account holders would have thought they had a year to establish the best approach to sort out their affairs, so this 30 day limit will have taken them by surprise.

Whichever country you live in, it is your responsibility to establish what your tax liabilities are on all your income and gains and then submit an accurate tax return and pay your tax on time each year. When it comes to your savings, investments and pensions it is often possible to use legitimate arrangements to lower your tax bill, but you need to ensure the methods you use are fully compliant with local tax law. An advisory firm like Blevins Franks will guide you through your options and give you peace of mind that you are not paying more tax than necessary.

By Bill Blevins, Managing Director, Blevins Franks

18th October 2011

All information contained in this document is based on Blevins Franks? understanding of the legislation and taxation practice, in the UK and overseas, at the time of writing; this may change in the future.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.