Accountants lack understanding of UK-Swiss tax agreement

HMRC's strategy for communicating the terms of the UK-Swiss tax agreement, which came into force on 1 January 2013, has failed, according to a survey of accountants.

The Crowe Clark Whitehill survey revealed that nearly seven out of 10 accountants (65%) said that they had little or no understanding of the options available to UK residents holding Swiss bank accounts, a concerning statistic given the 31 May deadline for disclosure under the terms of the agreement.

Under the agreement, people with taxable assets in Switzerland have a choice of authorising their financial institution to disclose the details to HMRC or have the levy and withholding tax applied by the institution.

Those failing to comply face potential penalties of up to 150% of the taxes owed.

The survey found just 4% of those questioned, described their understanding as 'comprehensive' and only 13% have written to all their clients to outline the issues and potential problems.

A spokesman for Crowe Clark Whitehill, said: 'HMRC must do more to bridge the gap between the theoretical responsibility of accountants to notify their clients, and day-to-day, putting that theory into practice.

'However, it must be remembered that HMRC may consider it in their best interests not to promote the terms and conditions of the UK/Swiss tax agreement as the default position is the application by the Swiss banks of the withholding levy which is paid over to the UK authorities.

'In these cases, HMRC will receive the money without having to expend any time or resources, an option which must appear attractive. What is clear is that the only institutions actively pursuing a policy of writing to all of those involved and informing them of the choices and consequences with regard to the agreement are the Swiss banks.'

From 1 January 2013, accounts held by individual UK taxpayers in Switzerland will be subject to a one-off deduction in 2013, as long as the account was open on 31 December 2010 and is open on 31 May 2013.

HMRC say the one-off payment will settle income tax, capital gains tax, inheritance tax and VAT liabilities in relation to the funds in the account. The payment will not apply if the account-holder instructs the bank to disclose details of the account to HMRC. Following that disclosure, HMRC will seek unpaid taxes with relevant interest and penalties.

From the same date, any income and gains arising on investments held by individual UK taxpayers in Swiss banks will be subject to a new withholding tax. HMRC said the rates 'will be very close to the top rates of UK tax'.

Crowe Clark Whitehill advised the accountancy profession to 'arm themselves with knowledge and brace themselves for approaches from their clients over the forthcoming months. If they do not wish to give advice in this area, they must work with other specialists in this area.'

Another key finding from the survey of 120 accountancy firms is that 96% believe HMRC should launch a general disclosure mechanism, up from 78% last year.

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