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May 9, 2013
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Swiss Tax Treaty - 31 May 2013 Deadline

Taxpayers that are subject to the UK-Swiss Tax Treaty still have time to take action to avoid the one off levy being applied on 31 May 2013.

One Off Levy Under the UK-Swiss Tax Treaty

Under the terms of the UK-Swiss tax treaty, ‘relevant persons’ will be subject to a one off levy of between 21% and 41% on 31 May 2013.

The precise rate of the one of levy will depend on a number of factors such as the length of time the account was opened.

For these purposes, a relevant person is a person that has a beneficial interest in a Swiss bank account/deposit and was UK resident at 31 December 2010.

For many taxpayers, the cost of the one off levy will be higher than the actual tax that would have been payable under the normal rules or a disclosure facility such as the Liechtenstein Disclosure Facility (LDF).

Voluntary Declaration before 31 May 2013 = No One off Levy

In order to prevent the one off levy from applying it is necessary to communicate to the Swiss bank a declaration of voluntary disclosure authorising the bank to disclose details of the account to HM Revenue and Customs prior to 31 May 2013.

In practice, many Swiss banks set an earlier date (such as 31 December 2012) for their customers to provide the signed declaration of voluntary disclosure.  However, our experience suggests that the Swiss banks are still accepting voluntary declarations, even after the expiration of the date set by the bank.

Therefore, taxpayers are still within the time limits to make a voluntary declaration.

Implication of One Off Levy

Where a voluntary declaration is made, it is important that taxpayers pro-actively contact HM Revenue and Customs to bring their tax affairs up to date.

In terms of timescales, under Article 10 of the UK Swiss tax treaty details of taxpayers that have signed a voluntary declaration should be forwarded to HM Revenue and Customs by the Swiss government on a monthly basis from 31 July 2013 to 31 December 2013.

Therefore it is advisable that taxpayers/agents contact HMRC as soon as possible, and certainly before the information could be communicated to HMRC on 31 July 2013.

This could be achieved through:

1. A disclosure letter to HM Revenue and Customs.

Under this route, strictly speaking HM Revenue and Customs have the power to go back up to 20 tax years and penalties could be levied at up to 200% of the tax underpaid (depending on the tax year and country in which the income/gains arose).

2. Registration under the Liechtenstein Disclosure Facility

Disclosures made under the LDF benefit from a number of benefits such as; guaranteed immunity from criminal prosecution, the disclosure being limited to 1999/00 onwards and reduced penalties (normally 10% for tax years 1999/00 to 2008/09 and 20% thereafter).

A key feature of the LDF is the ability to transfer funds into Liechtenstein in order to establish a meaningful connection and qualify for the beneficial terms of the disclosure facility.

Interaction with the Isle of Man (Manx) Disclosure Facility

It is important to note that 'relevant persons' under the UK-Swiss Tax Treaty will not benefit from the full terms of the Isle of Man Disclosure Facility.

Therefore it is not possible to transfer Swiss assets to the Isle of Man in order to benefit from the Manx disclosure facility.

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