18 August 2011

With an agreement between the UK and Swiss tax authorities as to the treatment of undisclosed bank accounts now imminent, there is speculation that this will follow the format of a deal between the Swiss and the Germans announced last week.

The German deal has two strands:

• the Swiss banks will impose a withholding tax on the income of all those who have not come clean to the German tax authorities;
• and the Swiss banks will make a lump-sum payment of two billion Swiss Francs to the German authorities in lieu of past liabilities.This will be repaid to them as and when the individuals concerned make a full disclosure of their position.

As with the UK’s existing deal with Liechtenstein, the intention is that investors will be under pressure from both the banks and their domestic tax authorities to become tax-compliant. If the UK goes down the same route, however, the key factor will be the extent to which taxpayers are offered a ‘carrot’ to disclose. All the indications are that, while encouragement and assistance will be provided, any ‘amnesty’ will fall far short of the generous deal offered by the Liechtenstein Disclosure Facility (LDF). If that is the case the LDF – which at least at present is open regardless of the jurisdiction in which the offshore assets are held – will remain the best deal in town.

The LDF offers a mechanism for disclosure of all unpaid taxes with penalties usually capped at 10% and a cut-off point that means older tax liabilities simply drop out of the reckoning. For more about the LDF and how we can help you, visit our Liechtenstein Disclosure Facility pages.

Mark Giddens