Surprise over fewer untaxed British assets

British Chancellor of the Exchequer George Osborne was pleased to announce a Swiss tax windfall Keystone

There are fewer untaxed British assets in Swiss bank accounts than originally assumed, the Swiss Bankers’ Association (SBA) has said.

Its comments come in its first assessment of a British-Swiss tax deal, forged last year, which aims to sweep Swiss banks clean of undeclared money held in accounts of British clients.

The agreement imposes a one-off levy on money in Britons’ undeclared Swiss bank accounts and taxes future interest payments with effect from January 1 this year. 

But first indications from selected banks in Switzerland show that there are fewer untaxed British assets in Switzerland than thought, the SBA said.

“This is mainly due to the fact that many clients have resident non-domiciled status. These clients are not liable to taxation in the UK and thus do not fall under the agreement,” said the SBA in a statement on Friday.

Under the British tax system, these are in most cases people of foreign origin who live in Britain but who have no intention of remaining there.

The SBA added that numerous British clients had chosen to make voluntary disclosure to the tax authorities, which the association said was not surprising given Switzerland’s announced adoption of a global standard for the automatic exchange of information.

The bankers’ association said that as a result of these developments less tax than expected was being transferred to Britain by means of the one-off payment.

“The possibility can therefore not be ruled out that either none or only a small part of the banks’ guarantee payment of CHF 500 million ($521 million)  will be recovered,” it added.

As part of the withholding tax agreement, Swiss banks funded a CHF500 million pool to guarantee client payments above a minimum CHF800 million francs to meet their tax obligations.

Credit Suisse said on Friday that it expected a negative after-tax impact of no more than CHF 90 million as a result of the deal, which would be realised in its second quarter of 2013 results.

It is as yet the only Swiss bank to reveal these figures. According to the Swiss news agency, rival UBS is expected to publish its figures at the end of July, while Julius Bär will reveal theirs along with their half-year results.

Last month, Britain said it had already booked a £3.2 billion pounds ($4.8 billion) windfall from the tax deal.