Swiss Bank Accounts and Investment Portfolios

As a consequence of the UK-Swiss tax agreement that was signed in October of last year, the Swiss banks have now embarked upon the massive task of writing to all account holders who have a connection with the UK. At the time of writing some – such as Credit Suisse – have already mailed their letters; others (including UBS) are still waiting for further clarification regarding the implementation of the agreement. However, all can be expected to get in touch with their clients over the next month or so.

Why have you received a letter?

Letters are being sent to those whose names appear on the banks’ records as sole or joint holders of accounts (including those registered as joint holders for administrative purposes only). They are also being sent to those considered to be “relevant persons” in respect of trusts and foundations that hold Swiss accounts – typically the settlor or the principal beneficiaries. If you don’t know why you have received a letter you need to find out quickly and seek advice as to whether you have been sent the correct forms and whether you (or perhaps someone else) should complete and return them. Given the number of accounts held by Swiss banks (and the fact that they are at the same time dealing with account holders in other countries), it is inevitable that errors will be made. If you are to avoid a default position (see below), the onus will be on you to contact the bank even if you haven’t heard from them (for example, because you have failed to notify them of a change of address).

What do you need to do?

The Swiss agreement is complex with different options depending upon whether or not you are domiciled in the UK. At their most basic, however, the letters are giving account holders two choices:

  • To authorise the Swiss bank to pass details of the assets and the account holder, plus those of future income and gains, via the Swiss authorities to HMRC; or
  • To retain their anonymity but accept a one-off charge plus withholding taxes on future income and gains.

Account holders who are resident but not domiciled in the UK and claiming the remittance basis will need to provide a letter confirming their status signed by an appropriately qualified tax adviser (for those who fall into this category such certificates will be an annual requirement).

It cannot be emphasised strongly enough that these letters and the associated forms are not just for those who have not complied fully with their UK tax obligations. Even if you have declared and paid tax on all of your overseas income and gains – and there is no past in need of “regularisation” – you must provide in full the information asked for and do so before the deadline set by the bank (in some cases they require a response as early as 30 November). Some banks will follow up cases where they have had no response, first by trying to contact you directly and then by making enquiries as to whether you have moved etc. Others are applying a simple default system – a failure to respond by the deadline means that your account will automatically suffer the one-off charge and ongoing withholding taxes. If it turns out that you should not have suffered any deduction, the process of getting your money back is likely to be slow and painful.

Take advice now!

Situations where it makes sense to accept the withholding taxes are few and far between (in fact some banks are not even offering this as an alternative – it will be a choice between accepting full disclosure or closing your account). If you have historically complied with your UK tax obligations and intend to continue doing so then – while the forms themselves can still be confusing – the answer itself is easy. If you don’t fall into that category, however, you need to look at your options and make a fairly quick decision. Some people might still be tempted to move their funds elsewhere in the hope of staying one step ahead of HMRC but the sensible action will be to make a full disclosure now (typically via the LDF – the Liechtenstein Disclosure Facility) on the basis that the cost in terms of tax, penalties and fees is likely to be significantly lower than the deductions proposed by the Swiss.

Those who decide to move their funds elsewhere are going to be in for some sleepless nights. The expected rush of funds to Singapore has already been stalled by the Singapore government’s moves towards greater openness in the tax arena and wider exchange of information. There are other jurisdictions that still offer the level of secrecy once the essence of Swiss banking, but those countries tend to be less well regulated and it is surely only a matter of time before they too cave in to international pressure.

Disclosure via the LDF is still for many the obvious option. The terms are generous, it is fairly easy to get into, and HMRC not only want it to work but are welcoming participants with open arms. Whether the past non-disclosure was deliberate or accidental, whether it was down to you or the actions of another family member, the LDF is likely to be the least painful way to achieve a clean slate and peace of mind going forward – with the bonus that it places you in a position to then manage and plan your financial affairs properly without worrying about an early morning knock on the door from HMRC.

For help and advice in completing forms received from Swiss banks, advice on the options open to you if you have not been fully tax-compliant, assistance in registering for the LDF and submitting a disclosure, and help with managing and planning your tax affairs going forward, contact: