Tackling tax avoidance and evasion is a key part of the UK government’s strategy to ensure that everyone pays their tax. To effectively identify and tackle these measures the UK worked with the OECD, EU commission and other EU member states to introduce the Directive on Administrative Cooperation (DAC) in 2011.
The last amendment to DAC is known as DAC6. From a UK perspective, DAC6 covers all EU taxes other than VAT, customs duties, excise duties and mandatory social security contributions.
The European Commission issued a press release on 8 May 2020 proposing that the various deadlines for reporting and the exchange of information under DAC6 be deferred by three months because of the impact of the COVID-19 crisis.
The UK implemented the sixth amendment to DAC via regulation and from 1 July 2020 a mandatory disclosure regime for intermediaries and / or taxpayers will come into effect. The aim is to improve tax transparency and tackle aggressive tax planning. During the Brexit transitional period, the UK is obliged to implement and comply with EU law and the government has indicated a willingness to maintain the disclosure requirements after the transitional period ends on 30 December 2020.
The International Tax Enforcement (Disclosable Arrangements) Regulations 2019 require the disclosure of any cross-border arrangement from 25 June 2018 that meets certain “hallmarks”. Under the current timetable, an historical report for the period 25 June 2018 to 30 June 2020 is due to be filed by 31 August 2020. At the same time, from 1 July 2020 any arrangement meeting the hallmarks must thereafter be reported within 30 days.
Under the Commission’s proposal, the historical report would need to be filed by 30 November 2020 and any arrangements meeting the hallmarks after 1 July 2020, would need to be disclosed by 31 October 2020.
In addition, with “the current uncertainty regarding the evolution of the COVID-19 pandemic”, the European Commission indicated the possibility of further extending the deferral of reporting by an additional three months to a total deferral of six months.
This would be good news for taxpayers and intermediaries who are already struggling with all the challenges brought about by COVID-19. It may also help HMRC who have not yet published final guidance on the regulations.
Ensuring full compliance with the regulations will be a big task for many taxpayers and reporting preparations should continue wherever possible. If you have any questions, please get in touch.