LDF and Swiss-UK Tax Agreement
C, Capital stock at the end of the year outflows Inflows from years 9 and 10 that
the account was opened. For ac- compensate for outflows from years
counts opened before 1 January 1 to 8
2003, the capital stock at
3] December 2002.
Source: Mutual Agreement, p.1., 2012.
The formula seems very complicated. However, only a few input date a required for calculation. To
calculate the tax duty the following numbers are required:
e Asset value at 31/12/2002 or the year end value in of the year the account was opened
e Asset value at 31/12/2010
e Outflows until 31/12/2010
e Estimated increase in value in 2011 and 2012 (396 return p.a.)
e Estimated inflows/outflows in 2011 and 2012
This formula calculates the total tax liability, which is paid as a one-off payment to the Swiss tax au-
thority and then forwarded to HMRC. The regularised amount is C, (relevant capital).? As evidenced
by Obenhaus, the common tax rate is the lowest™ possible or slightly higher. Tax rates over 34% are
very extraordinary ^"
The fact, that only the amount C, is regularised causes a dilemma if, after 31 December, 2010, there
are asset inflows higher than 20% of the total assets. In this case, any amount above the 20% threshold
will not be regularised.^* Formula (3.5) contains the constraint that if Cio (asset value at the 31 De-
cember 2012) is larger than 1.2 * C (asset value at the 31 December 2010) the maximum value of C,
(relevant capital) is Cg plus 20%.
Assume that someone has a Swiss bank deposit worth GBP 1 million at 31 December 2010. He has
inflow of GBP 500,000 in 2011, which consists of untaxed assets deposited in Luxembourg. Since the
asset value will be GBP 1.5 million on 31 December, 2012, the condition will trigger and only GBP
1.2 million will be accepted as relevant capital. Therefore, GBP 1.2 million will be regularised but
GBP 300,000 will not. In this case, a voluntary disclosure is required in order to become fully tax
compliant with respect to bankable assets in Switzerland.
^5 CH-UK Tax Agreement, 2011, art. 9, para. 12.
46 21%
^ Obenhaus, 2011, p. 510.
^5 Hosp & Langer, 2012 (2), p. 350.
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