Swiss Bank Account Holders on HMRC’s Hit List

HMRC is hardly out of the headlines these days and now the ongoing issue of tax evasion is back in the media spotlight because an estimated 15,000 wealthy taxpayers with Swiss bank accounts have become the latest recipients of HMRC’s letters. This first occurred in September, after a list naming high net worth individuals who are customers of HSBC’s Swiss division was passed to HMRC via the French tax authorities, by an ex-employee. This week brought a new direction to the developments.

For decades Switzerland, with its secretive banking system, has been a tax haven for the very rich. This era has now been brought to a partial close as support for HMRC’s initiative to ‘reign in’ those taxpayers was confirmed officially by the Swiss finance minister, Hand-Rudolf Merz, and the Swiss Bankers Association. Merz declared he would be starting ministerial negotiations with the aim that UK residents with Swiss bank accounts should pay tax on the interest they earn.

However, whilst the Swiss have conceded to hand over some of the taxes due to the Treasury, they will retain the right to keep the identities of investors with a bank account confidential. After all, this is one of their unique selling points and it is arguable that provided the authorities co-operate fully and the individual(s) concerned are paying their tax dues, they can remain anonymous. We can probably take an educated guess at who they are anyway!

Although an agreement in principle has been reached, the finer details of this deal are yet to be finalised. It is likely however that it will include a one off levy for historical gains and an ongoing tax for future income earned from deposits. This will probably be taxed at 50%, which, arguably, is a justifiable assumption since one can assume that those with the motivation to operate a Swiss bank account are likely to be earning well in excess of £150,000.

For the UK government, the potential revenues to be generated from this exercise are considerable. It has been estimated that between £100 to £125 billion is held by wealthy UK investors in Swiss bank accounts. Tax could also be backdated because the new agreement could also see the introduction of a tax levied on accounts inherited from the original holder on death, which were previously undeclared to UK authorities.

Looking forward, one can expect further announcements of this nature to follow since the new Coalition government announced their future emphasis on tax avoidance in the Budget. Whilst little actual detail was given out about exactly what this means at the time, the Treasury has estimated their measures to ensure the country’s highest earners are unable to use tax loop holes will generate an estimated £7bn a year by 2015 in additional income tax revenue.

If you receive a letter from HMRC please contact us on 0870 2255220.

Robert is an expert writer for small business accountants, Audit, Sage Accounting Solutions, Company Secretarial, Outsourcing your Finance Function, tax adviser, Financing Your Business, Inward Investment Services, Joined Up Tax and Legal Services.