Tax

DAC 6 update: significantly reduced scope and planned replacement

We’ve been informed by HM Revenue and Customs (HMRC) that reporting under DAC 6 will be required for a limited time, but only for arrangements that meet hallmarks under category D.

Man using laptop and smartphone to produce report

We understand from HMRC that this reduction in scope will affect all arrangements, including those where the reporting trigger falls in the 'look-back' period in the rules (between 25 June 2018 and 31 December 2020).

Regulations have been laid before parliament to introduce such changes, with effect from 31 December 2020.

These reduced reporting requirements are expected to apply for a limited time only.

The UK will consult on and implement the OECD’s Mandatory Disclosure Rules as soon as practicable to replace DAC 6.

The hallmarks under category D that are retained, broadly speaking, cover arrangements of two types:

  • arrangements which may have the effect of undermining reporting obligations concerning the automatic exchange of information
  • arrangements which obscure beneficial ownership

Read more about these hallmarks in HMRC's International Exchange of Information Manual.

HMRC indicates that these changes are possible following the end of the Brexit transition period and under the provisions of the new trade agreement between the UK and the EU.

The DAC 6 rules are not well targeted in the UK context and they impose a significant compliance burden on business, so we welcome this decision and look forward to the opportunity to engage on the design of the proposed replacement regime.

We expect that the UK’s own regime for the disclosure of tax avoidance schemes (DOTAS) will continue to apply.

Read our piece on DAC 6: Implementing the new EU tax reporting rules in the UK for further background.

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