Pandemic pushes HMRC into six-month deferral of reporting deadlines for DAC6 directive

Published on 26th Jun 2020

The deferral is in line with other Member States' approach to extending the reporting dates for disclosing cross-border tax arrangements – with no action promised on non-reporting over the period until the amended regulations come into force.


On 25 June 2020 HMRC announced, in light of the ongoing COVID-19 pandemic, that it would delay the reporting deadlines for DAC6 by six months and will amend the UK regulations (which come into force on 1 July 2020) to give effect to this deferral. This follows the European Commission's proposal to extend the reporting deadline, which was agreed in the European Parliament on 19 June 2020.

The amended regulations may not be in force by 1 July but HMRC has confirmed that no action will be taken for non-reporting during the period between 1 July 2020 and the date the amended regulations come into force. HMRC has also confirmed its intention to publish its final guidance on DAC6 shortly.

As a result of the deferral, the first reporting deadline will now be 31 January 2021 in respect of arrangements reportable between 1 July 2020 and 31 December 2020, and thereafter within the period of 30 days for arrangements which become reportable on or after 1 January 2021. The date for reporting historic cross-border arrangements (that is, arrangements reportable between 25 June 2018 and 30 June 2020) has been delayed to 28 February 2021.

DAC6 background

DAC6 is an EU directive (implemented in the UK by regulations which come into force on 1 July 2020) which imposes mandatory disclosure rules on "intermediaries" involved in certain tax advantaged cross-border arrangements affecting at least one EU Member State (which, for these purposes, includes the UK). The rules have a retrospective element as they require intermediaries to report to their local tax authorities certain cross-border arrangements in which the first step in the implementation took place on or after 25 June 2018.

An "intermediary" is anyone who designs, markets, organises, makes available or implements a reportable cross-border arrangement but it also includes any person who knows (or could be reasonably expected to know) that they have assisted such activities. Consequently, lawyers, in-house counsel, accountants, banks, and financial advisers can all be intermediaries under the rules. There are penalties for non-compliance with the rules. Under the UK regulations, the default position for non-compliance will be a one-off penalty of £5,000 with daily penalties applying in more serious cases.

Only those cross-border arrangements that meet certain hallmarks or criteria (broadly speaking a list of the features of transactions that present a strong indication of tax avoidance) need to be reported. Although some of the hallmarks have a "main benefit" test which will be met if obtaining a tax advantage constitutes the main benefit (or one of the main benefits) of the arrangement, some hallmarks (including hallmarks relating to certain transfer pricing issues) do not. Therefore, even if the arrangements are not tax-driven, the parties involved will still need to consider reporting under DAC6.

There are a number of limitations to the reporting obligation, for example in relation to legal advisors where legal professional privilege applies or where a number of intermediaries are involved (as only one must make the disclosure). However, if a legal adviser is not required to disclose the arrangement because of legal professional privilege, the taxpayer itself may need to disclose the arrangements.

Osborne Clarke comment

The six-month delay to the deadlines for reporting under DAC6 is very welcome and brings the UK in line with the approaches announced by a number of other EU Member States. The additional time and the updated HMRC guidance, which we expect to be published shortly, will help intermediaries, many of which have been hit hard by COVID-19 pandemic, to comply with their obligations. In another welcome move, HMRC has also confirmed that its IT system (through which reports will be made to HMRC) will be made available to taxpayers and intermediaries to report arrangements ahead of the new, deferred deadlines and HMRC will use the additional time to work with taxpayers and intermediaries on this.

Despite the delay to the reporting dates, intermediaries should continue to press ahead with their preparations and ensure they have processes in place to capture the detail of reportable transactions now and inform taxpayers of any obligation that they may have to report.

If you have any questions relating to DAC6 and what it may mean for you, please get in touch with any of the contacts listed below.


* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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