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HMRC internal manual

International Manual

Clearance under the agreement: Amounts not cleared: Tax obligations not cleared (the future)

Individuals who elected to incur withholding tax on any income or gains arising in Switzerland were  either able to treat the tax withheld as clearing their UK liability on those amounts or to treat the tax as a payment on account in respect of their total UK tax liability for the relevant tax year.

Clearance applied unless an individual opted for the payment on account treatment.

Where clearance was applicable the individual would have also ceased to be liable to any amount of interest, penalties or surcharge in respect of the Swiss income or gains.

Although clearance would not apply if an individual opted to treat the tax withheld as a payment on account, in these circumstances any of the tax withheld which exceeded an individual’s UK liability on the Swiss income or gains would have  been available to be set off against other UK tax liabilities of the same tax year. In addition, if an excess of tax withheld remained after any set off, this could have been repaid.

In order to treat the tax withheld as a payment on account, an individual must have included an appropriate election within their annual Self Assessment return. As well as including details of all relevant Swiss income and gains in the normal way, the return must have been accompanied by the withholding tax certificates received by the individual at the end of the tax year. Further information on certificates is available at INTM820600.

There are also limited circumstances where income arising on an individual’s Swiss assets may affect their UK liability in other areas. Tax credits, the High Income Child Benefit Charge and the income limit for the annual personal allowance are all examples of situations where an individual’s total income, including sums cleared under this part of the agreement, is relevant in determining the extent of any UK tax charge.

Individuals affected by the agreement would have needed to take appropriate account of these, or any similar considerations, in order to ensure that they made an accurate Self Assessment return of their UK tax liability.