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Warning about missing clause in Swiss-UK agreement

Some clients may be 'deceiving' their advisers

14 November 2013

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Some clients may be 'deceiving' their advisers

Advisers should beware clients who have opted for the withholding tax route under the Swiss-UK agreement, according to accountancy and business advisory firm BDO.

Despite being urged to fully disclose all offshore accounts, some clients will have made use of the withholding tax option under the Swiss-UK agreement

to preserve their anonymity, warns Fiona Fernie, tax partner in BDO's tax investigations team.

However, that anonymity can only be maintained by continuing to "deceive" their adviser and HMRC.

Fernie said: "Contrary to what many individuals believe, there is no clause of the Swiss-UK agreement that exempts UK resident Swiss account holders from declaring their Swiss assets to HMRC.

"Advisers must insist that their clients make a full disclosure of all offshore assets if they are aware that their client has them - for example, because the client has sent them a certificate of tax withheld under the Swiss-UK agreement.

"There may be no more tax to pay, but it is not ethical to act for a client who wishes to submit a tax return that is not complete."

Penalties for an inaccurate return are a percentage of the tax potentially lost, not a fixed amount. The Swiss-UK agreement states that if all the conditions are met, "…the relevant person shall cease to have any liability to United Kingdom taxes including interest, penalties and surcharges that are chargeable in respect of..." on the Swiss income.

Fernie said this is an untested area and may yet lead to court cases.

She continued: "Extra care is needed with non-UK domiciled clients because where they are correctly claiming the remittance basis there may still be a disclosure issue based on HMRC's tax return guidance for 2012-13.

"This issue serves as yet another reminder that the Swiss-UK agreement does not give individuals the same level of protection and certainty as disclosure agreements such as the Liechtenstein Disclosure Facility - for both clients and their advisers."

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Tax & Wealth structuring