The UK has published the final version of the updated regulations for UK Mandatory Disclosure Rules (MDR). These regulations will come into force on 28 March 2023, and any arrangements entered into on or after this date will need to be reported to HMRC under these rules. The new MDR rules will replace the existing DAC6 regulations, though HMRC have confirmed that the DAC6 reporting portal will remain open for another month to allow arrangements entered before 28 March to be reported under DAC6.

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The International Tax Enforcement (Disclosable Arrangements) Regulations 2023 (UK MDR) regulations, were laid before the House of Commons on 17 January 2023. UK MDR will come into force on 28 March 2023. Any UK arrangements entered on or after 28 March 2028 must be reported to HMRC under UK MDR (and not UK DAC6).

HMRC will open a new portal to support UK MDR, however, the DAC6 reporting portal will remain open until the end of April 2023 to allow arrangements entered into before 28 March 2023 to be reported under DAC6. The current DAC6 guidance (which is relevant to MDR for hallmarks D1 and D2) will be updated where necessary to reflect these new regulations.

VinciWorks will support all their UK-based clients in making the transition from DAC6 to UK MDR. HMRC will be joining VinciWorks for a webinar about UK MDR on 15 February 2023.

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Wednesday 15 February, 12pm (UK)

In November 2022 HMRC released the summary of responses from their consultation on the UK’s Mandatory Disclosure Rules (MDR).

The consultation clarified that:

  1. The historic lookback period will go back to 25th June 2018 (and not 29th October 2014 as originally stated).
  2. Reporting will be via XML only.

With UK MDR expected to come into force in the first half of 2023, Vinciworks will be joined by John Sandeman, HMRC’s policy official for Mandatory Disclosure Rules, who will help our listeners get to grips with the UK MDR and how it may impact your organisation.

The webinar will cover:

  • What are the key differences between UK DAC6 and UK MDR?
  • Who does UK MDR apply to?
  • Who is required to report under UK MDR?
  • How will VinciWorks be supporting UK MDR?
  • Participant questions for HMRC

Free registration

From new ESG regulations to a crackdown on bribery, rapid fluctuations in crypto currency, changes to the regulated sector and the ongoing conflict in Europe demanding a laser-like focus on the supply chain, 2023 looks set to demand even more from compliance professionals.

We have created an in-depth guide to everything compliance in 2023. The guide covers the top ten items you can expect to see in your regulatory inbox, with tips on next steps.

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HMRC have just released their summary of responses from their consultation on the UK’s Mandatory Disclosure Rules (MDR).

There were three major outcomes from the responses.

1. Historic Lookback Period 

HMRC had initially suggested that the historic lookback period under UK MDR would go back to 29th October 2014 in line with the Model Mandatory Disclosure Rules for CRS Avoidance. Having considered the balance between burdens on the business and the likely compliance benefits of the data, the government has decided that reporting pre-existing arrangements should only be required from 25 June 2018.

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Canada is updating its mandatory disclosure legislation to be more in line with the OECD’s initiative to combat tax evasion, known as BEPS Action 12, which shows that the lack of timely, comprehensive and relevant information on aggressive tax planning strategies is one of the main challenges faced by tax authorities worldwide. The changes are set to go into force in 2023.

What is the background of Canada’s MDR?

In the 2021 Canadian Budget, it was announced that Canada would be amending the Income Tax Act to require certain transactions to be reported to the Canadian Revenue Agency (CRA). These new Mandatory Disclosure Rules are set to be implemented in 2023. 

In February 2022 the Canadian Department of Finance released draft legislation that included a description of mandatory disclosure measures which will ultimately help the CRA to become aware of tax evasion ­and aggressive tax avoidance much earlier on in a transaction.

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VinciWorks understands that the UK is unlikely to introduce its own version of the Mandatory Disclosure Rules (UK MDR) before 2023.

As the government has changed and the Treasury has fully changed its Ministers, including the Financial Secretary to the Treasury who is responsible for tax policies, the official position is that the government is still reviewing the consultation responses. It is unlikely that we can expect any serious developments in relation to UK MDR in the near future.

VinciWorks is in regular discussion with HMRC and will be providing updates when we have more information.

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Companies being investigated for failure to prevent facilitation of tax evasion 

The Criminal Finances Act, which came into force in September 2017, introduced the requirement for businesses to have reasonable procedures to prevent the facilitation of tax evasion. If you do not feel that your organisation complies with the Criminal Finances Act, it is important to start a thorough risk assessment of all areas of your business operations. Organisations must also draw up an implementation plan that includes training on the Criminal Finances Act.

The UK government periodically announces investigations being undertaken under the Corporate Criminal Offences (CCO).

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Outside HMRC

UK MDR is making small steps towards implementation. The IT and Policy teams at HMRC are hard at work finalising everything that is required ahead of the new legislation.

Between November 2021 and February 2022, HMRC conducted a consultation on the new UK MDR legislation. While the results of the consultation have not yet been published, we understand that the results are ready and HMRC are making good progress with the final legislation. The announcement of a start date for UK MDR is expected soon.

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On 11 January 2022, the UK government published a consultation seeking views for how a worldwide 15% minimum corporation tax should be domestically implemented. The consultation will run for 12 weeks, until 4 April 2022.

Background:

In May 2019, the OECD/G20 Inclusive Framework on BEPS (Inclusive Framework) agreed a Programme of Work for Addressing the Tax Challenges of the Digitalisation of the Economy. 

The Programme of Work is divided into two pillars:

Pillar One addresses the allocation of taxing rights between jurisdictions and considers various proposals for new profit allocation and nexus rules;

Pillar Two (also referred to as the “GloBE” proposal) focuses on the remaining BEPS issues and seeks to develop rules that would provide jurisdictions with a right to “tax back” where other jurisdictions have not exercised their primary taxing rights or the payment is otherwise subject to low levels of effective taxation.

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