30/01/20

REGULATION: DAC6 Implementation Approaching.

As published on lawgazette.co.uk, Thursday January 30, 2020.

Any hope that Brexit might provide UK solicitors with an escape hatch from rigorous new EU requirements to report transactions to the tax authorities were dashed by HM Revenue and Customs yesterday. James Marshall, HMRC's policy lead for implementing the so-called DAC6 regime in the UK, told a packed event hosted by magic circle firm Freshfields that the UK remains legally obliged to adopt the measure on 1 July.

DAC6 imposes mandatory reporting of cross-border deals bearing the hallmarks of aggressive tax planning. However many questions remain about what transactions will have to be reported, the timetable of reporting and who will be liable for penalties. Solicitors have also raised concern that compliance could put them in breach of legal professional privilege.

Regulations implementing the directive, the International Tax Enforcement (Disclosable Arrangements) Regulations 2020, were laid in parliament on 13 January. However Marshall said that final guidance on compliance would not be ready until June following consultation on a draft expected for April or May. 'We need to get a bit more understanding that what we've done so far is right, before sharing it more widely,' he said.

Tom Shave, tax partner at accountants Smith & Williamson said this would not give firms time to prepare for 'a really challenging piece of legislation'. A survey of 50 law firms conducted by compliance software supplier VinciWorks, which organised the event, found a lack of HMRC guidance to be the biggest concern about DAC6.

On the question of who would be responsible for making reports, Marshall said that providers of services as well as promotors would be liable. 'The starting point is that everyone is an intermediary.'

However he offered a crumb of hope over the 'look-back' provision, which will require intermediaries to file reports of relevant transactions dating back to June 2018. In monitoring compliance, where the DAC6 directive is unclear and firms had to rely on yet-to-appear HMRC guidance, 'we will absolutely be taking that into account'.