Back in the 1960s and 1970s successive Labour chancellors ratcheted income taxes higher and higher until, at one point, the marginal rate of tax on unearned income hit a staggering 98%.
Against this background, tax avoidance and even tax evasion were considered fair game and socially acceptable. Having an offshore account was almost a status symbol.
Nowadays, with a top rate of 45 %, income taxes are now considered reasonable and anyone blatantly avoiding large amounts of tax is regarded as a bit of a pariah and someone who is not pulling his weight while everyone else does their bit to reduce the budget deficit, so a HMRC tax investigation could then be commissioned.
Riding the wave of this change in sentiment, HMRC are cracking down hard on avoidance and evasion and even getting major tax havens onside. The seemingly impregnable fortress of the serial tax avoider, Switzerland, with its strict banking secrecy laws, is finally co-operating with the UK taxman.
The country’s tax authorities have agreed a deal with the UK Exchequer where, in exchange for acknowledging Swiss secrecy obligations, the Swiss banks will make a down-payment of half a billion Swiss Francs against liabilities as yet unidentified and will also make a levy of between 19% and 34% on capital held in the banks as at 31st December 2012 to cover arrears of past undeclared taxable income. The percentage paid by each UK taxpayer will depend on how long they have held their accounts.
Interestingly, no retroactive levy will be made on any capital removed from Switzerland by May 31st 2013.
The situation regarding funds remaining in Swiss banks on an ongoing basis is that UK taxpayers will have a withholding tax deducted from their accounts on all income and gains with 48% applied to income and 27% to capital gains. This money will be paid to HMRC tax investigators without the names of account holders being identified.
For any UK taxpayer with undeclared money in a Swiss bank, there is one final alternative to not paying the levy or moving the funds out of the country and that is to come clean and disclose any accounts to the UK tax authorities. It remains to be seen how this is going to work and what, if any, amnesty arrangements will apply.
The resolute way in which these unprecedented measures have been effected underlines just how determined the new crackdown on tax avoidance really is. If you think there is a danger of your own personal affairs or your business coming under the microscope and being subject to a tax investigation, make sure you are ready to enlist the help of a top accountancy firm who will have specialists dealing with this sort of eventuality. Many of them will be ex HMRC staff who know how things work from the other side and should therefore be able to mitigate potential HMRC investigation problems.
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