Mandatory disclosure rules: draft regulations – Law Society response

The proposals

HM Revenue and Customs (HMRC) is seeking views on the design of draft regulations that would replace DAC 6 and require disclosure of certain arrangements to HMRC.

These draft regulations are made to implement the OECD's model mandatory disclosure rules for common reporting standard avoidance arrangements and opaque offshore structures.

They replace similar existing EU rules introduced previously (as part of the directive known as DAC 6).

The rules require taxpayers and intermediaries to disclose information on these types of arrangements to HMRC.

Our view

Part of the proposal is that there would be a requirement to report pre-existing arrangements dating back to 2014. We think that should be reconsidered.

It would require law firms and other businesses to carry out internal due diligence and file reviews going back eight years.

This would apply to law firms that have already recently carried out similar reviews back to 2018 to comply with DAC 6.

This further backward-looking review would be costly and practically difficult, and we question whether it is necessary and proportionate.

We also make several other representations about the detailed design of the rules, to try to make these easier for members to implement in practice, including in relation to how the rules interact with legal professional privilege.

What this means for solicitors

The regulations will require intermediaries, which can include solicitors, to send information to HMRC about defined categories of reportable arrangements and structures.

Solicitors will therefore need to identify situations where they have a duty to report.

Even though the proposed new rules have similarities with the current DAC 6 requirements that they will replace, they will not be identical.

It may therefore be necessary for law firms to update internal processes and guidance to support compliance with the new rules.

If the requirement to report pre-existing arrangements back to 2014 is implemented, law firms may also need to run a retrospective review process.

Next steps

The consultation closed on 8 February 2022.

The government will review the draft regulations in light of the responses received and amend them as necessary.

The final regulations will then be laid before parliament and the government envisages these will come into force in summer 2022.

Read the consultation on the GOV.UK website

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