"Account holders who choose the "secrecy route" could be opening up their surviving family members or personal representatives to a potentially unforeseen and expensive secondary charge on their death," said Martin O'Kane, tax investigations director at Crowe Clark Whitehill. He added: "Given what is at stake, account holders need to carefully consider what course of action to take, and should seek independent advice. The days of the anonymous Swiss bank account are drawing to a close."
The UK/Swiss Agreement, which is designed to increase transparency around Swiss bank accounts for taxation purposes, follows an announcement in the Chancellor's Autumn Statement that an estimated £40 billion is being held in Swiss accounts by UK taxpayers. Under the agreement, Swiss banks will be required to freeze 40% of an account holder's assets under management in the event of his or her death, if they have chosen to remain anonymous. These funds represent a potential Inheritance Tax charge to be levied on the assets.
Representatives of the deceased who accept the 40% charge will not be able to benefit from any exemptions and reliefs, including the £325,000 nil rate, on the inheritance. Alternatively, they can choose to obtain a legal statement confirming that the account holder was non-UK domiciled for the purposes of inheritance tax, or authorise the bank in question to disclose the account to UK tax authorities.
"[This] option will, of course, have no detrimental implications if the account holder has been a compliant taxpayer. However, it could lead to much wider enquiries for non-compliant taxpayers, with no protection for a surviving spouse or family members," said Mr O'Kane. He went on to say that elderly and infirm people in particular should remember that, after May 31st this year, the decision to remain anonymous could increase the boundaries in tax charge from 21 to 41% to an effective tax range of 52.6% to 64.6%. This, he said, could be "quite a hefty price to pay for preserving secrecy which at the end of the day may at best be expensive and at worst be worthless".
Essentially, Swiss bank account holders need to be aware that HMRC's option to "buy anonymity" in March comes with strings attached, and their dependents may still bear the brunt of the authority's scrutiny when they pass away. Crowe Clark Whitehall advised anybody who is unsure about their tax position to seek the independent advice of experts before deciding how to proceed.