CIOT: New German-Swiss tax deal opens door to UK-Swiss deal rewrite

Today’s announcement that Switzerland and Germany have agreed changes to their tax treaty is likely to lead to higher charges for UK holders of undeclared Swiss bank accounts too.

Under the revised German-Swiss deal, undeclared money will be subject to an anonymous one-off charge of 21-41 per cent, rather than the 19-34 per cent previously agreed. A protocol to the UK-Swiss deal (which set the same 19-34 per cent range as the original German-Swiss deal) states that, if Germany and Switzerland agree a higher rate of tax under their deal, the UK can ask for that to apply to the UK-Swiss arrangement too.1

Gary Ashford, who represents the CIOT on HMRC’s Compliance Reform Forum, commented:

“The changes announced to the Swiss-German deal today open the door to more changes to the UK-Swiss agreement. We have seen much criticism of this deal in the UK, and I would be surprised if ministers here do not take the opportunity to ramp up the tax charges under the deal.

“However the agreement between the UK and Liechtenstein for those with untaxed assets there to make a disclosure to HMRC in return for a small fixed penalty and reduced assessments is better value in many cases, and if we see a further toughening of the UK-Swiss deal then the Liechtenstein agreement may prove to be an even more attractive alternative, even for those holding money in Switzerland, as the Liechtenstein agreement covers worldwide assets providing a Liechtenstein asset is secured at the time of going forward to HMRC in the UK.

“Further recently proposed changes to the UK-Swiss agreement in relation to inheritance tax could mean that the executors of a UK citizen holding funds in Switzerland who dies sometime in the future could face tax charges of 40% of the fund, on top of the potential 34% which may have previously been taken. There are therefore many more ‘teeth’ in the current UK-Swiss deal, and given the announced changes in the Swiss-German deal, those teeth could well be sharpened even more!”

Notes to editors

Article XVIII of the Protocol, signed 6 October 2011, to the UK-Swiss Agreement, states:
Should Switzerland before the end of April 2012 conclude with the Federal Republic of Germany a provision regarding the one-off payment for the regularisation of the past that provides for a higher level of taxation than under the Agreement, Switzerland shall without delay inform the United Kingdom through the diplomatic channel. If the United Kingdom so requests without delay through the diplomatic channel, the higher level of taxation shall apply under the Agreement. In such case, the necessary amendments shall be jointly agreed by the competent authorities.

The Chartered Institute of Taxation (CIOT) is a charity and the leading professional body in the United Kingdom concerned solely with taxation. The CIOT’s primary purpose is to promote education and study of the administration and practice of taxation. One of the key aims is to achieve a better, more efficient, tax system for all affected by it – taxpayers, advisers and the authorities.

The CIOT’s comments and recommendations on tax issues are made solely in order to achieve its primary purpose: it is politically neutral in its work. The CIOT will seek to draw on its members’ experience in private practice, government, commerce and industry and academia to argue and explain how public policy objectives (to the extent that these are clearly stated or can be discerned) can most effectively be achieved.

The CIOT’s 15,800 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’.


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George Crozier
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