UK residents with Swiss assets face further red tape for the 2012/13 tax year in relation to the EU Savings Directive, and the Swiss UK tax agreement that is planned to come into force on 1 January 2013.
The red tape differs for UK and non-UK domiciled persons and we recommend that individuals confirm their domicile position now to avoid complications in the future.
UK domiciled persons
UK resident and domiciled individuals will pay tax at source on interest arising on the Swiss assets for 2012/13, and from 1 January 2013 will suffer withholding taxes on both income and gains arising on their Swiss assets. Furthermore, unless asset holders confirms that the bank can disclose the assets to HMRC, the bank will deduct a flat rate tax of between 19% and 34% to regularise the past.
Non UK domiciled persons
Non-domiciled individuals are able to take advantage of their domicile status, if they are claiming the remittance basis and, where appropriate, paying the Remittance Basis Charge (RBC). Swiss banks have been writing to their UK resident non-domiciled clients asking that they confirm in writing that they intend to be taxed in the UK on the remittance basis and, where applicable, pay the RBC for 2012/13.
Individuals that are claiming the remittance basis will need to arrange for their UK tax adviser to verify that they:
- claimed the remittance basis;
- paid the RBC (if appropriate); and
- that HMRC were not reviewing their non-domicile status.
If any of your clients with Swiss assets are non-UK domiciled and claim the remittance basis but did not receive a letter, it is important that their domicile status is reviewed with the Swiss bank to confirm why the client was not asked to declare their intentions for 2012/13.
From 1 January 2013 non-UK domiciled clients will also need to decide whether they wish to pay the flat rate tax, disclose the assets to HMRC, pay tax on a self-assessment basis or opt out. The decision as to which option should be taken is a complex one and requires careful consideration.
Even though the Swiss UK tax agreement does not come into force for just under nine months, it is clear that the Swiss tax authorities and banks are tightening their compliance procedures now. Steps should also be taken now to ensure that your clients are aware of these developments and that their affairs are in order. Prevention rather than cure is the order of the day.