Directive on Administrative Cooperation 6 (“DAC6”) and the Mandatory Disclosure Rules

DAC6 is a response to the OECD’s Base Erosion and Profit Shifting project, and aims to strengthen tax transparency across the EU and counter aggressive tax planning. It also incorporates the OECD’s Mandatory Disclosure Rules. HMRC has confirmed that these regulations will apply whether or not the UK withdraws from the EU, but has not confirmed how they will operate outside the framework of the EU.

DAC6 1920 (2)

Requirements

The new regulations require organisations, either in their capacity as an intermediary or as a taxpayer, to report certain cross-border arrangements to HMRC where they meet at least one of five prescribed hallmarks. The rules are retrospective and apply to arrangements implemented from 25 June 2018.

Penalties will be imposed for non-compliance, so it is important for organisations to consider now how they will comply with these regulations.
Click here for further details on these rules.

The challenge

HMRC must follow the EU Directive when implementing the UK legislation but the final UK regulations have not yet been released. Given the retrospective nature of the regulations it is nevertheless necessary for organisations to plan now on how to comply.
As the Directive applies to all EU Member States and the rules apply to cross-border arrangements, organisations may need to know how the legislation differs in other EU countries, which adds an extra layer of complexity and a greater burden on tax and finance teams.

How Smith & Williamson can help

Smith & Williamson is assisting organisations in understanding the rules, analysing past arrangements and preparing for future reporting. This includes:

Impact assessment
  • Consider impact as intermediary/taxpayer
  • Identify functions/products that might be caught
  • Assess size of impact
  • Consider potentially reportable historic transactions
  • Plan the approach to managing reporting
Identify processes
  • Consider existing processes and necessary enhancements
  • Record relevant transactions since June 2018
  • Consider how relevant information should be collected & analysed
  • Capitalise on existing information reporting processes
Agree internal responsibilities
  • Identify stakeholders
  • Agree who should take responsibility for reporting
  • Consider appropriate sign-offs
  • Carry out appropriate training
  • Arrange reporting to taxpayers by intermediaries
Implement reporting frameworks
  • Structured data collection framework
  • Implement reporting tool to monitor, identify and capture arrangements
  • Ensure an appropriate audit trail is created
  • Use of the reporting schema
Monitor legislation developments
  • Monitor UK legislation and guidance releases
  • Consider interaction with other EU countries
  • Industry association updates
Data capture & Reporting
  • Provide a tool to gather data to create an audit trail and prepare for reporting
  • Advice on whether an arrangement is reportable
  • Report on behalf of organisation where legislation permits

Please contact us for more information and assistance with DAC6.

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