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.

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Guy Dingley is a partner in Covington’s London office, concentrating on taxation and employee benefits, with a particular emphasis on corporate taxation and value added tax, taxation of investment funds, global mobility, and the establishment of incentive arrangements.

Mr. Dingley’s practice encompasses corporate…

Guy Dingley is a partner in Covington’s London office, concentrating on taxation and employee benefits, with a particular emphasis on corporate taxation and value added tax, taxation of investment funds, global mobility, and the establishment of incentive arrangements.

Mr. Dingley’s practice encompasses corporate and business acquisitions and disposals, mergers and reconstructions together with advice on the tax aspects of supply chain management and employee remuneration.

In the share incentive arena, Mr. Dingley has advised clients on the establishment of a wide range of share incentive arrangements designed to suit their business objectives, and often with tax benefits.

Mr. Dingley has extensive experience of structuring investments and acquisitions in over twenty five jurisdictions, including continental Europe, Australia, India, and China. His expertise covers a wide variety of industry sectors, but he has particular experience in the life sciences, telecommunications and media, branded goods and energy arenas.

Photo of Michael M. Lloyd Michael M. Lloyd

Michael Lloyd practices in the areas of tax and employee benefits with a focus on information reporting and withholding on cross-border payments (e.g., Forms 1042 and 1042-S) and Foreign Account Tax Compliance Act (FATCA), backup withholding, employment taxation, the treatment of fringe benefits…

Michael Lloyd practices in the areas of tax and employee benefits with a focus on information reporting and withholding on cross-border payments (e.g., Forms 1042 and 1042-S) and Foreign Account Tax Compliance Act (FATCA), backup withholding, employment taxation, the treatment of fringe benefits, cross-border compensation, domestic information reporting (e.g., Forms W-2, 1099, 1095 series returns), penalty abatement, and general tax planning and controversy matters. Mr. Lloyd advises large U.S. and foreign multinationals regarding compliance with information reporting and withholding issues, as well as a range of other federal and state tax issues.