The Treasury expects a multimillion pound windfall after entering talks with the Swiss authorities over thousands of untaxed bank accounts. Switzerland has agreed to support the UK's efforts to tax offshore accounts in a move that mimics an earlier agreement with Liechtenstein. The development, which follows a long-running campaign backed by the Guardian to clamp down on tax evasion, is expected to raise £1bn in extra revenues.
It is understood negotiations opened recently between the two countries as part of a wider EU attack on secret bank accounts held in Switzerland. The UK expects to agree a withholding tax that would be applied by the Swiss authorities and sent to the UK exchequer. Negotiations are believed to be at an early stage and are likely to include calls for a broader exchange of information between Swiss banks and HM Revenue & Customs.
Treasury sources stressed that it would not be revealing any details of tax rates, or amounts that might be raised. However, the number of people covered by an agreement would be likely to exceed the Liechtenstein deal and raise more than £1bn. The initiative comes after two HMRC amnesties have failed to entice many wealthy taxpayers with offshore accounts to declare their taxable income.
Last year HMRC began its second amnesty, promising to withdraw penalties if taxpayers declared their taxable income, mainly on investments. A 10% penalty was applied to taxpayers coming forward with details of offshore arrangements. At the time, the tax authority hinted it planned to use powers to parachute in investigators to question officials in tax havens.
It is understood only 10% of the hoped-for 100,000 taxpayers came forward by the first deadline. HMRC officials said around 1,100 came forward by the second deadline in January, after which officials said a 100% penalty would apply to all unpaid offshore tax bills. Swiss officials have previously refused to bow to demands for records unless HMRC provided a name and details of the local bank under investigation. Without the details HMRC was powerless to see the interest earned by individuals and deposited in Swiss banks.
The Treasury is understood to believe that a deal with the Swiss is the only route to generating any tax from Britons with offshore accounts in the country. A discussion of tax on interest earned in the past was also on the table. Germany has also started talks with the Swiss in a move that could potentially reap multibillion pound tax benefits. Earlier this year an amnesty by the Rome tax authorities led to more than €15bn returning from Swiss banks to Italy.
