DAC 6 – Mandatory disclosure on cross-border tax arrangements

Are you involved with cross-border transactions, either as an individual, company or partnership?

If so, you may have a reporting obligation under new UK legislation referred to as the Directive of Administrative Cooperation (DAC 6). Failure to comply with these reporting requirements can result in penalties up to £5,000, and in more serious cases up to £1,000,000, therefore it is important to act now and ensure you are compliant especially as the reporting deadlines for DAC 6 are as short as 30 days.

When does a reporting obligation exist?

An obligation to report under DAC6 exists when there is a cross-border arrangement which contains at least one of the Hallmarks.

What is a cross-border arrangement?

Broadly, a cross-border arrangement means any ‘scheme, transaction or series of transactions’ involving either:
• More than one EU member state, or
• An EU member state and a third country

What are the Hallmarks?

There are 5 categories which are designed to capture transactions where there is a risk of tax avoidance.

A. Arrangements with confidentiality clauses or contingent fees.

B. Arrangements involving contrived steps, converting income into capital or circular transactions.

C. Arrangements where there is a deduction for cross border payments or relief from double taxation.

D. Arrangements which undermine or circumvent tax reporting obligations or where there is an obscured beneficial ownership chain.

E. Transfer Pricing arrangements which involve the use of unilateral safe harbour rules or the transfer of hard- to-value intangibles or an intra group transfer of functions, risks, or assets.

Who needs to report?

Either:

The intermediary

i.e. the scheme promoter or service provider who provided aid, assistance or advice in the design, marketing, organisation or implementation of the arrangement.

Or

The taxpayer

As a taxpayer, it is important you identify whether you have a reporting obligation and this is likely to require you to liaise with your advisers in the UK and overseas.

 

When do you have to report by?

Date of Arrangement Reporting Deadline
25 June 2018 to 30 June 2020 28 February 2021
1 July 2020 to 31 December 2020 30 January 2021
1 January 2021 onwards 30 days from the first of when
• the arrangement is made available / ready for implementation;
• The first step in implementation has been made;
• The intermediary has provided aid, assistance or advice.

 

If you would like further information on DAC 6, please get in touch with one of our specialist tax advisors: Becky Maguire, bmaguire@garbutt-elliott.co.uk Angela Mikola, amikola@garbutt-elliott.co.uk