George and his cronies celebrate getting more tax from everyone- except their pals…
When you think of Switzerland, you probably think of one of three things: cuckoo clocks, bumping off relatives or secret bank accounts. Well, thanks to a whizzo new scheme that the Government and HMRC are already patting each other’s backs on, secret Swiss accounts will no longer be so secret, as all UK taxpayers will now have to pay huge amounts of tax on the secret cash. Everyone except those pesky non-doms, that is…
The new agreement will tax both existing funds held by UK taxpayers in Switzerland, as well as future income or gains arising. Previously undisclosed amounts held at the date of agreement will be subject to a significant one-off deduction of between 19% and 34% to settle past tax liabilities, leaving those who have already paid their UK tax unaffected. Swiss banks will make also an up-front ‘goodwill’ payment from Switzerland to Britain of CHF 500m.
From 2013, a new withholding tax (deducted at source so you can’t ‘forget’ to pay it) of 48% on investment income and 27% on gains will apply to UK residents with funds in Swiss bank accounts. This will be accompanied by a new information sharing provision which will make it easier for HM Revenue and Customs to find out about Swiss accounts held by UK taxpayers. The new charges will not apply if the taxpayer authorises a full disclosure of their affairs to HMRC, and therefore pays regular UK tax on the income or gains.
The levy is expected to yield an initial payment of £400m for the UK in 2013, with total revenues reaching £5bn by 2015. George Osborne, Chancellor of the Exchequer, said:
"Tax evasion is wrong at the best of times, but in economic circumstances like this it means that hard-pressed law-abiding taxpayers are forced to pay even more. That is why this Coalition Government made it a priority to go after those who don't pay their fair share. We will be as tough on the richest who evade tax as on those who cheat on benefits”
Grand words, but depressingly unsurprising is the news that this scheme will not apply to the often mega-wealthy non-doms who live in the UK. The Treasury said “The agreement only applies to natural persons resident in the UK... In principle, the agreement is not applicable to so-called 'non-UK domiciled individuals'.”
The Tories have often been accused of unfairly favouring non-doms, very broadly speaking those who can prove they have a strong connection to a country other than the UK and who intend to return there. However, although the specific exclusion of non-doms would seem to be a favour for their pals, in reality it is probably not quite as nepotistic as we all assume.
You see, under current rules, those non-domiciled in the UK are only taxable on non-UK income and gains to the extent that they are remitted to the UK, ie brought into the country. If cash is stashed in a secret Swiss account it is clearly not being brought into the UK, so there is no charge to UK tax, other than the 2008 £30,000 remittance basis charge. What is unclear is whether the charge will not apply to those claiming the remittance basis (and therefore paying £30 grand a year if they’ve been UK resident for 7 years) or whether all non-doms are exempt. If the latter, surely all non-doms will simply move all their offshore cash to Switzerland so they can avoid paying UK tax and the £30,000 charge.
Perhaps that’s what’s in it for Switzerland.