British citizens with bank accounts in Switzerland that have remained secret for decades have delivered a significant fillip to chancellor of the exchequer George Osborne, with a one-off £3.2 billion (€3.75 billion) payment to clear unpaid taxes.

Following years of pressure, the British government signed a tax co-operation agreement with the Swiss authorities in October 2011 designed to ensure that decades of tax evasion by people living in Britain was curbed, if not ended.

One-off deduction
Under the deal, a one-off deduction of between 21 per cent and 41 per cent was made on May 31st on all accounts held in Swiss banks by people living in Britain, depending on the sums held – as long as the account was open on December 31st 2010 and also on May 31st last.

The levy covers income tax, capital gains tax, inheritance tax and VAT liabilities, but not any payments due to HM Revenue and Customs under corporation tax, though account-holders would avoid penalties.

The deduction was not applied if the account holder instructed their bank to disclose details of the account to the British taxman, who will seek the recovery of unpaid taxes, along with relevant interest and penalties.

Criminal cases unlikely
While the UK/Swiss agreement does not guarantee immunity from prosecution, the two sides agreed in a side letter that criminal cases are highly unlikely unless the sums held in the Swiss accounts were the proceeds of crime.

Revenue and Customs will be entitled to request information from the Swiss authorities about British citizens that they suspect have an account there, but the number of requests is limited to 500 per year for the first three years.

The tax windfall comes as a boon to the chancellor ahead of next week’s review, where he will outline projected spending rules that will govern the Treasury in the first year of the lifetime of the next government.