Category Archives: DAC6

DAC6 is a new regulation that requires intermediaries to comply with mandatory transparency rules and hallmarks. Read the latest guidance on the Directive and get updates on our DAC6 training.

Upcoming webinar: DAC6 – A live demo of our reporting solution

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Wednesday 4 March, 12:00pm

On 13 January 2020, HMRC laid the UK’s DAC6 legislation before the House of Commons in the form of the International Tax Enforcement (Disclosable Arrangements) Regulations 2020, Statutory Instrument 2020 No. 25. The legislation will come into force on 1 July 2020. Reporting will be required for transactions in which the first step of implementation was carried out on or after 25 June 2018.

Since DAC6 was adopted by ECOFIN on 25 May 2018, VinciWorks has been in close consultation with HMRC and over 50 leading international firms to establish the implications of the EU Directive and build a reporting solution to help firms comply.

Join us for a short meeting where we will be covering the core features of our DAC6 reporting software and give guidance on how intermediaries can use it to report transactions.

If you have any questions regarding Omnitrack that you would like answered during the meeting, enter them in the space provided in the form below. We will also allow time during the webinar to ask questions.

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Upcoming webinar: DAC6 – How to prepare

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Wednesday 26 February, 12:00pm

DAC6 is an EU Directive that aims to strengthen tax transparency and fight against aggressive tax planning. Anyone who is involved in a cross-border arrangement including certain characteristics might fall within the scope of DAC6. This might include banks, trust companies, insurance companies, holding companies, group treasury functions, consultants, accountants, financial advisors and lawyers (including in-house).

On 13 January 2020, HMRC laid the UK’s DAC6 legislation before the House of Commons in the form of the International Tax Enforcement (Disclosable Arrangements) Regulations 2020, Statutory Instrument 2020 No. 25. The legislation will come into force on 1 July 2020. Reporting will be required for transactions in which the first step of implementation was carried out on or after 25 June 2018.

In this webinar, we will be joined by Director of Best Practice Gary Yantin and Research and Legal Executive Ruth Cohen to share the key findings of HMRC’s final legislation and its consultation and give guidance on best practice to firms on their reporting requirements under DAC6.

The webinar will include:

  • A summary of HMRC’s implementation of DAC6
  • Examples of how different countries have implemented DAC6
  • A summary of our findings from core group meetings with leading international firms
  • Practical application of DAC6 in your firm
  • Answering questions from attendees

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UK DAC6 legislation: HMRC take a more proportionate approach following consultation

The UK’s final DAC6 legislation was adopted by Parliament on 13 January 2020. Significant amendments have been made to the UK’s legislation based on the feedback from the 11-week consultation phase that the HMRC carried out last summer. The final UK legislation takes a much more proportionate interpretation of the EU Directive than the previous draft. 

Here is a summary of five key amendments you should be aware of:

1. Penalties

HMRC amended the penalty regime to ensure it is proportionate and flexible enough to deter non-compliance while at the same time not penalising cases where genuine mistakes were made.

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UK DAC6 legislation laid before the House of Commons

On 13th January 2020, HMRC laid the UK’s DAC6 legislation before the House of Commons in the form of the International Tax Enforcement (Disclosable Arrangements) Regulations 2020, Statutory Instrument 2020 No. 25. The legislation will come into force on 1 July 2020. Reporting will be required for transactions in which the first step of implementation was carried out on or after 25 June 2018.

What is DAC6?

DAC6, the 6th Directive on Administrative Cooperation, requires taxpayers and their advisers (“intermediaries”) to report details of certain types of cross-border arrangements to HMRC. Arrangements are reportable if they contain certain characteristics (“hallmarks”) that could be used to avoid or evade tax. Just because a transaction is reportable under DAC6 it does not always mean that it is not tax-compliant. 

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DAC6 – dealing with transactions that change over time

Gif showing VinciWork' DAC6 reporting solution
VinciWorks’ DAC6 reporting tool guides intermediaries through the process of determining whether a transaction is reportable

One of the big challenges that intermediaries face in reporting transactions under DAC6 is what to do when things change. Client projects which may have been deemed non-reportable, or which may not even have involved any cross-border elements at the outset, may transform into a potentially reportable arrangement later on. The delay between starting work for a client and the matter becoming reportable may be months or even years.

Download a guide to DAC6 compliance

VinciWorks’ DAC6 solution, powered by Omnitrack, guides intermediaries through the process of determining whether a transaction is reportable. It also integrates with existing client and matter management tools via its open API standard. And it now has pre-built integrations with leading matter management tools, such as Intapp Intake, for seamless onboarding of new transactions. However, if a transaction becomes reportable much later on, how should this be handled?

This question can be broken down into two parts:

  1. How should I deal with changing transactions from a technical perspective in Omnitrack?
  2. How should I deal with changing transactions from a personnel perspective in terms of getting people to be aware of what they need to do?
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VinciWorks partners with Intapp on comprehensive DAC6 solution

DAC6 is a European regulation aimed at reducing international tax evasion and promoting transparency. The Directive requires law firms to report some forms of tax advice and tax transactions. These “mandatory disclosure requirements” (MDR) are for tax transactions that cross EU borders, where it seems that the primary purpose of the transaction is a tax advantage.

DAC6, like the original Money Laundering Directive, is a fundamental shift to the way that law firms operate. It is not merely a change for compliance teams, it affects the entire practice, including engagement letters, practice management systems and anyone involved in any tax advice.

A comprehensive DAC6 solution requires integration between the different systems involved in practice management.

DAC6 reporting involves many internal and external stakeholders
DAC6 reporting involves many internal and external stakeholders
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DAC6: Guidance on HMRC Reporting Requirements

Back in May 2018 the Economic and Financial Affairs Council of the European Union (ECOFIN) adopted the 6th Directive on Administrative Cooperation (“DAC6 Directive”). This new directive requires tax intermediaries to report specific cross-border arrangements. 

In July 2019, HMRC released their draft DAC6 legislation together with their consultation document. These documents indicate that HMRC intends to align its reporting requirements with the DAC6 Directive, and HMRC will require intermediaries to report any additional information. 

Download a guide to DAC6 compliance

Who needs to report?

Any entity that acts as an intermediary for a cross-border transaction involving an EU Member State may have an obligation to report this to HMRC or a different EU tax authority.

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DAC6 flow chart – Which transactions are reportable under DAC6?

DAC6 screenshot of interactive flowchart
Our DAC6 course, DAC6: Advanced, follows an interactive flowchart to help intermediaries fully understand their reporting requirements under DAC6

On 25 May 2018, the Economic and Financial Affairs Council of the European Union (ECOFIN) adopted Council Directive (EU) 2018/822, also known as the 6th Directive on Administrative Cooperation (DAC6), requiring tax intermediaries to report certain cross-border arrangements that contain at least one of the hallmarks defined in the Directive. The aims of DAC6 is to tackle tax evasion and avoidance, strengthen tax transparency and improve information sharing between EU Member States.

Count how many times you said the word “tax” this week. Easy? How about every time this month? Harder? All right, what about every time you said the word “tax” to a client in the last 18 months? Still confident about the number?

Now, think about every time that could have been construed as advice. What about doing transactions with other countries or thinking about tax planning measures? All of these instances might need to not only be remembered, but also recorded and reported to the national tax authority.

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Second DAC6 core group roundtable meeting summary

Ruth Cohen, VinciWorks' Legal and Research Executive
Ruth Cohen,
VinciWorks’ Legal and Research Executive

VinciWorks hosted a round table meeting at the office of Paul Hastings Solicitors with representatives from over 25 firms to discuss DAC6 and its implementation following HMRC’s Consultation Document and Draft Legislation. Ahead of the meeting, I was in touch with HMRC to ask them some questions relating to the proposed DAC6 legislation.

Here is an overview of the discussion:

Main Benefit Test

Are UK law firms expected to have in depth knowledge of how other member states will interpret the Main Benefit Test?

The consultation is clear that HMRC views the “main benefit test as an objective test: what matters is whether a tax advantage is the main or one of the main benefits that the person entering into the arrangement might reasonably be expected to obtain from the arrangement. That person’s actual motivation in entering into the arrangement is not relevant.

HMRC consider that it is necessary to look at the tax effect of the arrangement as a whole, but they recognise there are challenges to this and are considering how this will work in different examples.

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HMRC releases draft regulations and consultation on DAC6

DAC6 training screenshot of reporting flowchart

HMRC has just released its draft regulations on implementing the 6th Directive on Administrative Cooperation, known as DAC6, into UK law. From 1 July 2020, taxpayers and their advisers are required to report details of certain cross-border arrangements that could be used to avoid or evade paying tax to HMRC. The UK has been lagging behind their European counterparts in producing draft DAC6 legislation.

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