Against expectations, United Kingdom repeals DAC6 rules

Emelie Mahler
Emelie Mahler
Senior Manager, Head of Regulatory
Against expectations, United Kingdom repeals DAC6 rules

The UK government has previously indicated that DAC6, the EU’s implementation of the OECD mandatory disclosure rules (MDR), would remain in force and work as intended also after the Brexit transition period ended on 31 December 2020. Surprisingly, the HMRC has now communicated that DAC6 rules cease to apply in the UK effective as of 31 December 2020.

The UK government has previously indicated that DAC6, the EU’s implementation of the OECD mandatory disclosure rules (MDR), would remain in force and work as intended also after the Brexit transition period ended on 31 December 2020. Surprisingly, the HMRC has now communicated that DAC6 rules cease to apply in the UK effective as of 31 December 2020. 

The UK intends to introduce a new regime in line with the OECD MDR, instead of DAC6, as a part of the transition into international rather than EU standards on the field of tax transparency.

To cover the gap between the repealing of DAC6 and the introduction of a new MDR regime, reporting under DAC6 will still be required for a limited period time, however with a substantially limited scope. As per the Amendment of the International Tax Enforcement (Disclosable Arrangements) Regulations 2020, the rules are to be read as if Hallmark categories A, B, C and E were omitted. Only reporting of arrangements falling under category D Hallmarks concerning automatic exchange of information and beneficial ownership (commonly referred to as CRS avoidance arrangements and opaque offshore structures), corresponding to the OECD MDR. The amendments are applicable as from the start of the retrospective reporting period of DAC6, meaning effective as of 25 June 2018.

UK service providers, and in some cases also UK taxpayers, are thus still required to report arrangements falling under Hallmarks D which have been implemented between 25 June 2018 and 30 June 2020 (retrospective period) no later than 28 February 2021. The 30-day reporting deadline for arrangements implemented on or after 1 July 2020 started running by 1 January 2021 – meaning that reports are due by 31 January 2021.

It is expected that the UK will completely withdraw from DAC6 once a new MDR regime is ready to be implemented.

We will closely monitor further developments in the UK relating to DAC6 and MDR and will post an update once more details are published.

Please contact our regulatory experts if you have any questions on DAC6 or MDR.