UK and International Tax news

Mandatory Disclosure Rules To Replace DAC6 In The UK

Thursday 23rd February 2023

HMRC has confirmed that the OECD’s Mandatory Disclosure Rules will replace EU based DAC6 rules from 28 March 2023.

In January 2021, HMRC announced that, with the EU Directive DAC 6 no longer applying to the UK from 1 January 2021, reporting under DAC 6 would be replaced with reporting requirements under the OECD’s Mandatory Disclosure Rules.

DAC 6 [formerly EU Council Directive 2011/16] applies to cross-border tax arrangements, which meet one or more specified characteristics (hallmarks), and which concern either more than one EU country or an EU country and a non-EU country. It mandates a reporting obligation for these tax arrangements if in scope no matter whether the arrangement is justified according to national law.

HMRC confirmed reporting under DAC 6 to HMRC would still be required for a limited time, but only for arrangements within a hallmark under category D, in line with the UK’s obligations under the Free Trade Agreement with the EU. These hallmarks include arrangements which attempt to circumvent the OECD’s CRS and automatic exchange of information, and those which attempt to obscure beneficial ownership and involve the use of offshore entities with no real substance.

The final version of the regulations for UK Mandatory Disclosure Rules – The International Tax Enforcemrnt (Discxlosable Arrangement) Regulations 2023 – has now been published and any arrangements entered into on or after 28 March 2023 must be reported to HMRC under these rules. These rules will replace the existing DAC6 regulations which will be repealed at the same time.

HMRC has issued further guidance on the reporting requirement and advised that the DAC6 reporting portal will remain open for one month to allow arrangements entered into before 28 March 2023 to be reported under DAC6.

Additional guidance will be issued to reflect the adoption of the new regulations.

 

If you would like to discuss the above in more detail, please contact Keith Rushen on 0207 486 2378.

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