£5bn Swiss accounts raid

By James Kirkup, and Louise Armitstead

George Osborne announced an agreement with the Swiss authorities to attempt to recover tax on an estimated £125bn kept in the famously discreet banking system.

Announcing the deal, Mr Osborne launched a strong attack on wealthy tax evaders, likening them to benefits cheats.

Under the agreement, UK accounts held in Switzerland in May 2013 will be subject to a one-off levy that could be worth as much as 34pc of the account's contents.

The levy is expected to yield an initial payment of £400m for the UK in 2013, with total revenues reaching £5bn by 2015.

After the one-off levy, the Swiss will then impose a "withholding tax" on British-owned accounts that are not properly declared to HM Revenue and Customs.

That tax could be levied at 48pc on income and 27pc on capital gains.

Treasury sources said that the money raised would not be used to cut taxes in Britain, instead being put towards reducing the Government's deficit.

Investors in Swiss banks are bracing themselves for a turbulent ride in the wake of the deal. UBS and Credit Suisse, the country’s biggest banks, are likely to be hit along with other Swiss institutions such as Julius Baer and Lombard Odier.

The already embattled UBS settled with the US in 2009 after a bruising encounter with the American authorities over a $20bn (£12.2bn) tax evasion dispute.

James Badcock, at Collyer Bristow in Switzerland, said: “A lot of this cash has been at the Swiss banks for a long time and has counted as very stable assets. Now there’s going to be a big shift about and lots of uncertainty over these assets which the banks will need to handle very carefully.”

A reputation of strict secrecy has helped Switzerland build up a $2 trillion offshore financial sector. But, since the financial crisis, the country has faced an international campaign against tax evasion from governments with big budget deficits. The British deal follows a similar agreement struck recently with Germany.

The Government has previously suggested that it hopes to raise a total of £10bn from agreements with other tax havens around the world. Mr Osborne said: "Tax evasion is wrong at the best of times but in economic circumstances like this is means the hard-pressed law-abiding taxpayers are forced to pay even more. That is why this Coalition government made it a priority to go after those who don't pay their fair share. We will be as tough on the richest who evade tax as those who cheat on benefits."

Until now, HM Revenue & Customs (HMRC) has only been able get details of interest payments on Swiss accounts by providing the Swiss with complete details of specific accounts, information that is rarely available.

Under the new agreement, the Swiss will routinely notify HMRC about British holdings. The Swiss finance ministry said the countries have decided to facilitate mutual market access for financial institutions. "Likewise, the problem of purchasing data relevant for tax collection purposes has been resolved," the ministry said, adding: "The package also includes a solution for the problem of possible prosecution of bank employees."

Despite the deal, British holders of Swiss accounts will mostly remain anonymous. The Swiss banks will apply the new charges and pass the money to the Treasury without disclosing the names of account-holders to the UK.

Gary Ashford, of the Chartered Institute of Taxation, said: "The rate of withholding tax being charged is high. There is clearly a risk that account holders will move their money to even more distant and inaccessible locations, which is in neither governments' interests."

Experts said that the Swiss deal will also encourage investors to use an existing arrangement Britain has with Liechtenstein in order to settle any unpaid taxes. Telegraph