UK Government makes a Surprising Move Limiting DAC6 Obligations Post-Brexit

DAC6 Obligations in the UK

By Company Registrations Worldwide, 5th Feb 2021

DAC6 is an EU Directive which brings in measures to prevent tax evasion. It requires EU intermediaries and taxpayers to report information on cross border tax aggressive transactions among EU Member states. The local tax authorities will then share this information with all other EU tax authorities. The DAC6 rules require intermediaries to disclose cross-border arrangements where the first step was taken on or after 25th June 2018. This “look-back” period is particularly burdensome.

The DAC6 directive came into force in the UK on 1st July 2020 requiring professional intermediaries to report cross-border arrangements that met one of a number of “hallmarks” that could be used to avoid or evade tax. However, the UK has taken steps to limit the circumstances in which they will report cross-border transactions with the EU Member States. Legislation published by the UK government has narrowed the scope of reporting requirements under DAC 6.

How did the UK Limit their DAC6 Obligations?

On 31st December 2020, once the negotiations between the UK and the EU were completed, Her Majesty’s Revenue and Customs (HMRC) made an unpredictable announcement regarding DAC6. HMRC announced that reporting would only be required for arrangements that meet hallmarks under Category D which broadly deals with disclosing beneficial ownership. Reporting requirements under Hallmarks A, B, C and E which fall within the ‘look-back period’ have been repealed and will now not need to be reported in the UK. There will still be some historic arrangements in the look-back period, which fall within Hallmark. Those which have a trigger date falling on or after 1st January 2021 will need to be reported.

What does this mean going forward?

The UK government has agreed to maintain the international rules regarding the exchange of information on cross-border arrangements. In 2021 the UK will consult on the implementation of the OECD’s Mandatory Disclosure Rules. This will replace DAC6 and transition the UK from European to international rules.

This unexpected move has been welcome news to intermediaries in the UK and it appears to be the first step in de-regulating from EU Financial Services rules. This move could attract funds into London as post-Brexit regulations continue to unfold.

Company Registrations Worldwide can assist you to incorporate a company in the UK and to meet the ongoing company compliance obligations. Please Contact Us or call+353 1 6874518, a member of our team would be happy to assist you.