With retroactive effect, EU Council Directive DAC 6 is now largely inapplicable in the United Kingdom. DAC 6, which came into force on June 25, 2018, requires certain intermediaries (including those who provide legal, tax, or consultancy services) or taxpayers to disclose information related to cross-border tax planning. Our prior coverage of DAC 6 may be found here.
The UK had previously adopted the entirety of DAC 6 despite its departure from the EU. However, in an unexpected reversal of course, on December 31, 2020, the UK retracted nearly all of the DAC 6 reporting requirements, concurrent with its departure from the EU single market and customs union. The UK has confirmed that the change applies retroactively, so no disclosures will need to be made for certain prior transactions. In the coming year, the UK government will repeal the legislation implementing DAC 6 and in its place implement the OECD’s Mandatory Disclosure Rules.
Reporting under DAC 6 will still be required for a limited time for arrangements—both prior arrangements and new arrangements—that meet one of the hallmarks under Category D. As we explained in our previous post on DAC 6, Category D broadly deals with arrangements that are likely to undermine reporting obligations and obscure beneficial ownership.
The Category D reporting obligations will continue to apply to arrangements where the first step was entered into on or after June 25, 2018. Reports are due by February 28, 2021, although an earlier reporting deadline of January 30, 2021 applies to:
- arrangements that were made available for implementation, or ready for implementation, or where the first step in the implementation took place between July 1, 2020, and December 31, 2020; and
- arrangements in which a UK intermediary provided aid, assistance or advice between July 1, 2020, and December 31, 2020.
Importantly, reporting may still be required for transactions between the UK and another EU member state, because that transaction may be caught by the counterparty country’s DAC 6 legislation. However, since the UK is no longer an EU Member State, the reporting obligation would fall on the EU intermediary.