The UK has amended its DAC6 regulations as a result of the Brexit Free Trade Agreement. Only arrangements meeting the Hallmark D category will require reporting in the UK. This means that EU registered lawyers working in the UK might need to file DAC6 reports in the European Union. 

The EU Directive states that in order to be considered an intermediary, a person shall meet at least one of the following conditions:

(a) be resident for tax purposes in a member state;

(b) have a permanent establishment in a member state through which the services with respect to the arrangement are provided;

Register for our DAC6 email updates

In light of the amended UK DAC6 regulations as a result of the Brexit Free Trade Agreement, the Netherlands Tax and Customs Administration has confirmed to VinciWorks that a UK DAC6 report will not be accepted as sufficient evidence of a DAC6 report in the Netherlands.  

The Netherlands have confirmed that in line with the DAC6 Directive, they will send all DAC6 reports to the European database. However, the Dutch Mandatory Disclosure Team has made it clear that they have no obligation to share reports in any other way and the Netherlands will not actively do so. We will have to wait and see if and what the EU will decide on the exchange of information between EU countries and the UK. 

Register for our DAC6 email updates

On New Year’s Eve, HMRC made a surprise announcement that the UK is limiting the scope of DAC6 to only apply where a category D hallmark is present. This was in line with the UK’s obligations under the Brexit Free Trade Agreement, which requires the UK to implement, at a minimum, the standards and rules which have been agreed in the OECD concerning potential cross-border tax planning arrangements.

Last week VinciWorks hosted James Marshall, HMRC’s DAC6 Policy Lead to find out more about HMRC’s intentions. Here’s a summary of what was discussed:

Reporting for the historic period: HMRC expect only category D Hallmark arrangements to be reported for the historic periods (both the original period and COVID extension periods).

Reporting from 1 January 2021: HMRC expect only category D Hallmark arrangements to be reported.

Register for our DAC6 email updates

In response to the Brexit Free Trade Agreement, the UK has limited the scope of DAC6 to only apply where a Category D hallmark is present. 

This dramatic change is in line with the UK’s obligations under the Fair Trade Agreement that requires the UK to implement, at a minimum, the standards and rules which have been agreed by the OECD concerning potential cross-border tax planning arrangements.

Hallmark D arrangements are those designed to undermine tax reporting under common reporting standard and transparency rules. This shares substantial common ground with the Mandatory Disclosure Regime (MDR) developed by the OECD. 

The hallmark D category is split into two types of arrangements:

• D(1) Arrangements that have the effect of undermining reporting requirements under agreements for the automatic exchange of information.
• D(2) Arrangements that obscure beneficial ownership and involve the use of offshore entities and structures with no real substance.