Government deal with Swiss banks to recover "billions" in unpaid tax

The deal, which is still to be ratified by both UK and Swiss authorities, will secure "billions of pounds of unpaid tax" from 2013, the Treasury said in its announcement.

Under the terms of the agreement, all existing accounts held by UK taxpayers in Switzerland will be subject to a one-off deduction of between 19% and 34% to "settle past tax liabilities", the Treasury said. Swiss banks will also make an up-front payment of 500 million Swiss francs to the UK as a "gesture of good faith".

From 2013, a new withholding tax of 48% on investment income and 27% on gains will be applied to UK residents with funds in Swiss bank accounts. A new information-sharing provision will also make it easier for HM Revenue and Customs (HMRC) to find out about offshore accounts held by UK taxpayers.

The agreement is intended to "resolve the long-standing abuse of Swiss banking secrecy" by tax evaders. Neither strand will apply if the account holder authorises a full disclosure of their information to HMRC by the Swiss bank. HMRC will then seek any unpaid taxes with relevant interest and penalties where appropriate.

The agreement is part of an ongoing commitment to put in place financial information sharing agreements with other countries for the purposes of preventing tax evasion, the Treasury said. HMRC recently agreed the Liechtenstein Disclosure Facility, a special arrangement which allows people with unpaid tax linked to investments or assets in Liechtenstein to settle their tax liabilities.

Chancellor George Osborne promised to be "as tough on the richest who evade tax as on those who cheat on benefits".

"Tax evasion is wrong at the best of times, but in economic circumstances like this it means that hard-pressed law-abiding taxpayers are forced to pay even more," he said.

"The days when it was easy to stash the profits of tax evasion in Switzerland are over."

The agreement is expected to come into force in 2013, the Treasury said.