On 4 January 2021 HMRC confirmed that the EU rules on mandatory reporting of cross-border tax arrangements involving an EU member state (DAC 6) will mostly cease to apply in the UK from 2021.

Under the EU rules set out in DAC 6, cross-border tax arrangements must be reported if at least one EU member state is affected and the arrangements come within one of the specified hallmarks of a reportable tax arrangement. The UK previously implemented these rules in its domestic legislation, requiring UK intermediaries to disclose tax arrangements when they were the promoters or service providers in relation to the arrangements. The first disclosures under these UK rules were due by 30 January 2021.

Under the Trade Agreement and Cooperation Agreement between the UK and the EU, the UK will now apply the OECD mandatory disclosure rules instead of the EU’s DAC 6 rules.

The UK regulations are now to be amended to ensure that they apply only to the part of the DAC 6 arrangements that correspond to the OECD disclosure rules. This means the reporting requirement will only apply to arrangements within Category D of Part II of DAC 6. This requires reporting of arrangements that aim to sidestep the tax reporting under the OECD’s common reporting standard (CRS) and transparency rules.

The UK rules therefore still require reporting of arrangements that effectively aim to undermine the reporting requirements under agreements for the automatic exchange of tax information; and of arrangements that attempt to conceal beneficial ownership and use offshore entities or structures that do not have economic substance.

The change in the UK rules is retrospective. The reporting requirements apply in the case of arrangements when the first step in the arrangement took place on or after 25 June 2018, and the disclosure reports in relation to these arrangements should be made by 28 February 2021.

Reports in relation to certain types of arrangement are due by 30 January 2021. This earlier reporting date applies where the first step in the arrangement took place, or the arrangements were ready for implementation, between 1 July 2020 and 31 December 2020; or where a UK intermediary provided advice or assistance in relation to arrangements between 1 July 2020 and 31 December 2020.

The range of cross-border arrangements that need to be reported in the UK under these rules has therefore been significantly reduced, although parties in other EU member states would still need to report the arrangements to their own tax authorities under the DAC 6 rules.

A wide range of tax arrangements still needs to be reported to HMRC under the UK’s Disclosure of Tax Avoidance Schemes (DOTAS) rules which continue as before.