The UK government will cancel almost all of its planned implementation of the EU’s Council Directive (EU) 2018/822 (DAC6), regarding mandatory disclosure of cross-border tax planning schemes.
The move is one of the first manifestations of the UK’s new legislative freedom following the end of the EU exit transition period on 31 December 2020. Prime Minister Boris Johnson signed a free trade agreement with the EU on 24 December, under which both the UK and the EU committed to complying with OECD standards, but not requiring either to go beyond them.
Accordingly, the UK statutory instrument that was enacted to implement DAC6 will be repealed and replaced with a new instrument that requires UK intermediaries only to report so-called Category D tax planning: schemes that seek to either circumvent the OECD’s Common Reporting Standard tax information exchange system or conceal beneficial ownership of entities. HMRC has confirmed to STEP that only arrangements that meet the hallmarks under Category D will now need to be reported, therefore historic reporting (for arrangements up to 31 December 2020) in respect of the other hallmarks will no longer be required.
No arrangements of any kind have actually been reported yet, because activation of DAC6 has been delayed by the COVID-19 crisis and HMRC’s reporting portal did not open until 1 January 2021.
All other types of tax planning schemes that would have had to be reported under DAC6, including those caught by the wide-ranging ’main benefit’ test, will now be governed exclusively by the UK’s pre-existing legislation, mainly the disclosure of tax avoidance schemes (DOTAS) regulations.
The new regime is a stop-gap that will last from the beginning of this month until the UK has implemented the OECD’s Mandatory Disclosure Rules. The government will begin a consultation this year on draft legislation to do this.
’This simplification…will significantly reduce the scope of the additional work required by UK advisers to comply with DAC6’, commented Peter Jackson and Alice Thomas of law firm Taylor Wessing. ’It also reduces uncertainty for both advisers and corporate and private clients, as the Category D hallmarks largely relate to existing information-sharing and compliance regimes which will already be familiar to many.’
’This change removes an ongoing compliance burden for businesses’, commented Tanja Velling and Dominic Robertson of law firm Slaughter and May. ’From a UK perspective, DAC6 consisted of a set of poorly-targeted rules, many of which were either duplicating the UK’s DOTAS provisions or required disclosure of innocuous transactions, such as intellectual property on-shoring, which increased the UK tax base’.
However, although the changes significantly narrow the scope of DAC6 reporting requirements for the UK, the Directive continues to apply where an EU intermediary is involved in a transaction. UK businesses or their EU-based advisors that are party to cross-border transactions involving an EU jurisdiction will still need to consider the full scope of DAC6, and may have to report the transaction to the EU Member State.
News Source：【STEP 2021/01/07】
