27 January 2021: The first reports under the UK’s mandatory disclosure regime, based on the EU’s DAC 6, are due on 30 January 2021. ICAEW’s Tax Faculty provides a reminder of the rules.

The UK has adopted the OECD’s mandatory disclosure regime (MDR) which requires the disclosure to HMRC of reportable arrangements.

Arrangements are reportable if they meet various conditions and fall into either hallmark D1 or D2 of the EU’s own tax disclosure regime for cross-border arrangements (DAC 6). HMRC has published further guidance in its International Exchange of Information Manual on the types of arrangements falling within hallmarks D1 (IEIM645010) and D2 (IEIM645020).

The first deadline for reporting arrangements to HMRC under the MDR is 30 January 2021. This deadline applies to arrangements which were made available for implementation, or which were ready for implementation, or where the first step in the implementation took place between 1 July 2020 and 31 December 2020.

Any person (referred to as an “intermediary”) that designed, marketed, organised or made available for implementation or managed the implementation of a reportable cross-border arrangement may need to make a disclosure. That disclosure would be to HMRC where the intermediary:

• is resident for tax purposes in the UK;
• has a permanent establishment in the UK, through which it provides the services with respect to the arrangement;#
• is incorporated in the UK, or governed by the laws of the UK; or
• is registered with a professional association relating to legal, taxation or consultancy services in the UK.

An arrangement only needs to be disclosed by one person. Where there are multiple intermediaries involved in an arrangement, all but one will be exempted from making a disclosure. The remaining intermediaries should check that the person making the disclosure will do so by the required deadline.

There are also some situations where a taxpayer involved in the arrangement may need to make a disclosure instead, such as where:

• there is no intermediary involved in the arrangement (for example if the arrangement is designed and implemented by a company’s in-house tax team with no external help);
• any intermediaries involved in the arrangement have no presence in the EU or the UK; or
• where any intermediaries are not required to report information, such as through being protected by legal professional privilege.

As such, any taxpayers who think they may have been involved in a reportable arrangement should check whether an intermediary has or will make a disclosure in respect of the arrangement by the required deadline.

Penalties of up to (or more than, in exceptional circumstances) £5,000 may apply where an arrangement is not reported, so it is important that any parties subject to this regime monitor their reporting requirements carefully.

• More from ICAEW on DAC 6