Is the net really closing on Swiss bank accounts?
HMRC announced last week that they will shortly be writing to UK resident individuals and organisations holding bank accounts with HSBC in Geneva, using information obtained under a tax treaty last year.
This was presumably a reference to the account details stolen by a former HSBC employee and passed to the French authorities, which were then passed on to HMRC.
Those who receive a letter will have an opportunity to contact HMRC and disclose any liabilities, or face an investigation into their affairs which, HMRC state, could include a criminal investigation or the imposition of civil penalties of up to 200%. The work will be led by a new Offshore Co-ordination Unit which will be up and running in November. As Dave Hartnett put it: "[t]he net is closing on offshore evaders. Don't wait for HMRC to contact you. Come forward to us and make a full disclosure."
This announcement followed hot on the heels of the much vaunted Swiss/UK tax agreement, which was finally signed and published on 6 October. Under the agreement, accounts held by individual UK taxpayers will be subject to a one-off deduction, provided that they were open on 31 December 2010 and are still open on 31 May 2013. Thereafter, a new withholding tax will apply to income and gains arising on investments held in Swiss accounts. Neither the one off deduction nor the withholding tax will apply if the account holder authorises disclosure of the account and details of income and gains to HMRC.
Whilst attempts to crack-down on tax evasion are to be welcomed, tough talk from HMRC and invitations to the persons concerned to come clean are unlikely to get the job done. Also, whilst the Swiss/UK agreement is a step in the right direction, HMRC can do little in relation to accounts they do not know about and the most striking feature of the agreement is that it leaves Swiss banking secrecy untouched. Moreover, there is still no adequate explanation of why those with Swiss accounts facing the one off deduction will not simply close their account before 31 May 2013 and move their funds to other jurisdictions. Bad news for Swiss bankers perhaps, but possibly not good news for the UK Exchequer!
Mr Hartnett claims that: "this agreement will ensure that we know where money that flees Switzerland is heading. We won't be far behind." Yet all that the agreement provides is that, "[t]he Swiss authorities will give HMRC information about the top 10 destinations which they identify as places where money is moved to". As with a number of recent, high-profile HMRC announcements, there seems to be a slight disconnect between the bold language of the press release and the detail of the new policy being heralded. Time will tell whether the new agreement and connected initiatives will raise the additional billions that HMRC anticipate.