Pictured above: Jeff Millington

The government's much heralded deal with Swiss banks to allow UK citizens to "clean up" inherited money held in Switzerland creates more questions than answers according to a Birmingham tax specialist.

Jeff Millington, a director at BTG Tax, part of the Begbies Traynor Group, said: "While the deal to tax Swiss-held assets at source is obviously good news for UK PLC, it will be interesting to see exactly what the final agreement entails. Like most things, the devil could be in the detail.

"For a start if people are going to be allowed to clean up money inherited on an anonymous basis by paying a penalty, how much is that penalty likely to be? And what happens if you keep the offshore account and in later years you are investigated? What evidence will there be to show that a penalty was paid on the capital received, therefore avoiding any further tax charge?"

He said the main sticking point was likely to be the scale of the penalties. If the "fine" was higher than 20 per cent of the capital held, then anyone who has inherited money like this is still better off making a disclosure under the Liechtenstein Disclosure Facility. "We are settling cases under this facility for a cost of between 15 and 20% of the total capital held," he said.

"It is said that there will be a separate form of withholding tax that could be as much as 50 per cent of the income or gains made each year.  This could be exceptionally high where you have an individual who inherited that money and does not have high income in the UK.

"If the account was declared in the UK the tax could be as low as 20 per cent on interest earned. Compare this to the 50 per cent withholding rate. Again we have seen many cases where money was inherited a long time ago and the person who now has the account does not earn a great deal in the UK.

"In addition to this, what, if anything, is going to be done about the previous years that have not been taxed? An individual could soon be suffering withholding tax of 50 per cent and still be the subject of a long and intrusive inquiry into the previous 20 years.

"A very attractive option is already available under the form of the LDF, which would limit a person's tax liability to the period from April 6 1999. In addition to that, there is a guarantee of no criminal prosecution in relation to any tax evasion and once the account is disclosed it can be declared on the person's return.

"This may not only help avoid a high withholding tax, but in some years might produce some allowable capital losses.

"What is clear is that any UK taxpayers who still thought they could escape the ever lengthening arm of HMRC were very wrong."

For more information about Begbies Traynor, please visit their website here: www.begbies-traynorgroup.com