The long-expected deal between the UK and Switzerland regarding tax on Swiss bank accounts was agreed on 24 August, maintaining bank secrecy for those with accounts but at a price. The agreement is broadly similar to that already reached by Switzerland with the German tax authorities.

Under the terms of the agreement Switzerland will make an immediate payment on account to the UK of CHF500m (approximately £385m), but this will ultimately be refunded as tax revenues begin to flow to the UK.

Investors with funds in Switzerland at start of 2013 will face a withholding tax of between 19% and 34% (depending on how long the account has been open) with the tax, but not the identity of the account holder, passed to HMRC by the Swiss. This then settles any liability the account holder may have to the UK authorities in respect of the past, unless the monies have derived from criminal activity (“criminal” not being defined thus far), the individual is already under investigation (no word on whether this is any investigation or just serious fraud investigations), or the account holder has already participated in a previous disclosure facility – i.e. made an incomplete or incorrect disclosure.

From 2013 Swiss banks will be also required to operate a withholding tax on new income or gains from account holders. The withholding rate will range from 48% on interest and general income, 40% for dividend income, to 27% for capital gains. Again, no details of the account holders will be provided to HMRC but account holders will, presumably, have to satisfy the Swiss authorities as to the source of the income.

Alternatively account holders may avoid any withholding tax by agreeing that their details (and the details of their income) may be disclosed to HMRC. Account holders who choose to close their accounts instead will not have their details passed to HMRC.

The Swiss authorities have agreed that they will provide to HMRC, upon request, details of the number of accounts held in Switzerland for a specific named individual (although not details of what is in the accounts). There is a limit of a maximum of 500 such requests which may be made annually by HMRC.

Finally HMRC state that they “do not envisage” making future purchases of stolen bank data, and the prosecution of any bank employee who is alleged to have facilitated in any tax offences is “highly unlikely”.

The fact that any sort of deal at all has been reached with Switzerland is highly significant. Anyone affected by this announcement must seriously consider the various options open to them, including whether availing themselves of any other currently available disclosure facility, such as that in respect of Liechtenstein, is preferable. Expert advice in this complex area is essential and should be sought immediately.

For an informal, no-commitment, discussion of the impact of the Swiss deal please contact Peter Davies or Paula Jeffs on 01727 838255