International tax reporting changes: Directive on Administrative Cooperation 6 and the Mandatory Disclosure Rules

  • Written By: Hema Mistry
  • Published: Fri, 02 Aug 2019 15:03 GMT

HMRC has recently released draft regulations and a consultation document on the sixth version of the Directive on Administrative Cooperation (DAC6), an EU directive that will be implemented in the UK. DAC6 is a response to the OECD’s Mandatory Disclosure Rules aiming to strengthen tax transparency across the EU and counter aggressive tax planning. HMRC has confirmed that these regulations will apply whether or not the UK withdraws from the EU.

Lemon On Tree

The regulations require ‘intermediaries’ and, in some circumstances, taxpayers to report details of cross-border arrangements to HMRC where those arrangements fall within five prescribed hallmarks. The rules apply to arrangements implemented or made available since 25 June 2018. Significant penalties will be imposed for non-compliance, so it is important for organisations to consider now how they will comply with these regulations.


The definition of an intermediary is widely drafted to include “any person that designs, markets, organises or makes available for implementation or manages the implementation of a reportable cross-border arrangement”. HMRC refers to such intermediaries as ‘promoters’.

The definition also extends to any person that provides “aid, assistance or advice” with respect to a cross-border arrangement. This includes service providers, such as banks, consultants, accountants and law firms that advise on a reportable arrangement that is implemented by another person. It is possible for a service provider to argue that it is not an intermediary on the basis that it did not and could not reasonably be expected to know that it was involved in a reportable arrangement. It may, however, be required to provide evidence to support this position.

The consultation document confirms that where multiple intermediaries are involved in an arrangement, only one intermediary is required to submit a report. HMRC will then issue an Arrangement Reference Number, which must be communicated to the other intermediaries involved in the arrangement. There are complex rules regarding deadlines, obtaining evidence of reporting, and ensuring that all information is properly reported. It may be that the same arrangement must be reported several times where the intermediaries involved have access to different information.

There is a narrow exemption from reporting where an intermediary has legal professional privilege. This does not, however, exempt the intermediary from reporting any aspects of the arrangement that are not protected by legal professional privilege.


The five hallmarks set out the characteristics of cross-border arrangements that are caught by DAC6. They are split into generic and specific hallmarks, and some hallmarks also require the arrangement to meet the ‘main benefit test’. This test is broadly met where a main benefit of the arrangement is to obtain a tax advantage. Further detail on the hallmarks can be found here.


A Generic hallmarks linked to the main benefit test.
B Specific hallmarks linked to the main benefit test.
C Specific hallmarks related to cross-border transactions, some of which are linked to the main benefit test.
D Specific hallmarks concerning the automatic exchange of information and beneficial ownership.
E Specific hallmarks concerning transfer pricing.

Key dates and reporting

Where the first step of a reportable arrangement was implemented between 25 June 2018 and 30 June 2020, the report must be submitted to HMRC by 31 August 2020. Intermediaries and taxpayers should currently be identifying arrangements that may be reportable and gathering the reportable information. From 1 July 2020, cross-border arrangements that meet one or more of the hallmarks usually need to be reported within 30 days of the advice being given or the implementation of the arrangement, resulting in an additional ongoing compliance burden.

HMRC will exchange the reports it receives with other EU Member States. The reporting schema has not yet been released by HMRC.


The draft regulations impose strict penalties for failure to comply. For intermediaries, these can be as high as £600 per day for each day of non-compliance. For taxpayers, the maximum penalty is £10,000 for each offence. In addition, the First-tier Tribunal has the power to increase these penalties to £1 million.

HMRC Consultation

HMRC has confirmed that an arrangement will not be reportable if the tax consequences of that arrangement are in accordance with the intention of the legislation upon which the arrangement relies. For example, investing in an ISA will not be reportable even though it gives rise to a tax advantage. Reporting may still be required, however, if the arrangement is part of a wider cross-border transaction that does satisfy a hallmark .

Although the consultation document provides some guidance and examples of arrangements that may be out of scope, there remain many aspects for which further clarification is needed.

How Smith & Williamson can help

We are assisting businesses with analysing past arrangements and preparing for future reporting by:

  • Identifying whether the business could be an intermediary for the purposes of DAC6;
  • Conducting an impact assessment to determine the size of the impact and identify functions or arrangements that might be caught;
  • Assisting in identifying the reportable arrangements entered into from 25 June 2018 and future reportable arrangements;
  • Reviewing current processes, assisting with the implementation of a reporting framework to identify reportable arrangements and streamlining the process of collating reportable information; and
  • Providing training for relevant staff.

Find out more about Directive on Administrative Cooperation 6 (“DAC6”) and the Mandatory Disclosure Rules here

We are taking part in the consultation process and will provide further updates.


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