UK mandatory disclosure rules come into force
Published on 31st Mar 2023
New regulations require in-scope tax advisers to report details of avoidance arrangements online in XML file format
The new UK mandatory disclosure rules (MDR), which came into effect on 28 March 2023, require taxpayers and advisers – which are referred to as "intermediaries" and include lawyers and accountants – with a UK nexus to report prescribed arrangements and structures to HMRC.
Broadly speaking, the prescribed arrangements are those that are designed to facilitate non-compliance through the use of Common Reporting Standard (CRS) avoidance arrangements and opaque offshore structures and are based closely on the Organisation for Economic Co-operation and Development's model rules. The new rules also include a "look back" period (to 25 June 2018) for reporting pre-existing arrangements that have been entered into and not already reported. HMRC introduced this one major change to earlier draft regulations in its long-awaited response to the consultation on MDR implementation published in November 2022.
The new MDR regulations revoke similar EU rules, known as DAC6, which were implemented in the UK via regulations (SI 2020/25) prior to its exit from the EU. Due to the similarities of DAC6 in the UK and MDR, HMRC has confirmed that guidance in its International Exchange of Information Manual on DAC6 (at IEIM600000) will be used as a starting point for guidance under MDR. HMRC is currently updating this guidance for MDR (and we have seen a draft copy) and HMRC hopes to publish the final version later this year.
HMRC has also published some new guidance notes on checking if you need to tell HMRC about an arrangement, how to report and how to register to report arrangements under MDR.
Osborne Clarke comment
The arrangements reportable under UK MDR are broadly similar to those which were reportable under UK DAC6 and so, in general terms, the same processes can be followed by intermediaries when considering their obligations under UK MDR.
Advisers, however, who might be promoters in relation to CRS avoidance arrangements, will need to consider whether they have been involved in any arrangements since 25 June 2018 that are within the lookback period for MDR (and which have not been reported under UK DAC6), which will need reporting by 24 September 2023.
As the format for reporting under MDR is online using XML file format those advisers who may need to report to HMRC must be capable of doing so via that format – whether by building internal processes or purchasing third party software in order to do so.