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On 30 November 2021, HMRC published its draft UK Mandatory Disclosure Rules (MDR) and released its consultation which seeks views on the design of the draft regulations. The consultation will be open until 8 February 2022. The UK MDR is expected to come into force in summer 2022, replacing UK DAC6.

MDR requires advisers (and sometimes taxpayers) to report information to the tax authorities on certain prescribed arrangements and structures, including those that could circumvent existing tax transparency reporting rules known as the Common Reporting Standard or hide ownership of assets.

For this webinar, we were joined by John Sandeman, HMRC’s policy official for Mandatory Disclosure Rules, who helped attendees get to grips with the UK MDR and how it applies to your organisation. John also answered attendee questions.

The webinar covered:

  • Who does UK MDR apply to?
  • Top challenges firms are facing
  • Best practice for submitting reports under MDR
  • Approaches to legal professional privilege
  • What guidance HMRC are planning to release

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DAC6 and UK MDR

In 2018 the OECD developed Model Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures (“OECD’s Model Rules”). These rules require taxpayers and their advisers to report information to tax authorities on certain types of arrangements and structures that might facilitate tax evasion.

The EU responded to the OECD’s mandatory disclosure rules by introducing the EU Council Directive 2011/16, more commonly known as DAC6. As of January 2021, reporting under DAC6 was mandatory in all EU Member States.

Prior to the UK’s exit from the European Union, the UK government intended to adhere to the DAC6 regulations in line with the other EU member States. But at the spring Budget 2021, the UK government announced that DAC6 would be replaced with model rules in line with the OECD’s Model Rules. The consultation released on 30 November 2021 relates to the draft regulations to implement UK MDR, which means that the rules will apply on a global, rather than an EU, level following Brexit.

What is the UK MDR?

UK MDR refers to the UK’s Mandatory Disclosure Rules, the new regulations that came into force in summer 2022 and replace the current UK DAC6 regulations. The regulations are aimed at preventing tax evasion by requiring taxpayers and intermediaries to disclose information on certain types of arrangements and structures to HMRC. The UK MDR limited the regulations as they existed under DAC6 to apply to only those arrangements that would be reportable under the OECD’s Model Rules.

New Changes in UK MDR: Free Guide

VinciWorks has developed a guide to UK MDR that goes through everything you need to know on the subject. The topics covered in the overview include an overview of the UK’s approach, how UK MDR will be different from DAC6, timelines for implementation, and what will happen to the existing DAC6 regulations in the UK. The guide then goes on to cover information about historic reporting periods, intermediaries, taxpayers, hallmarks, reporting obligations, penalties, and reporting format. Finally, the guide introduces VinciWorks’ own DAC6 and MDR reporting solution. 

For a free download of the comprehensive guide, click here

VinciWorks’ DAC6 and MDR reporting solution

VinciWorks has built a robust MDR reporting solution providing intermediaries such as law firms, accounting firms and multinational businesses with the expertise, knowledge and technical infrastructure to report and manage cross-border transactions. From one centralised system, organisations can fulfil their reporting requirements across every EU member state as well as every country that has introduced the OECD’s MDR into law. Built in consultation with over 100 leading international firms, international tax experts, HMRC and other regulators, our tool features customisable workflows designed and updated for the intricacies of each EU country’s implementation of the rules. We offer a number of hosting options to suit any organisation’s needs, including on-premises hosting.

Features include:

  • Built-in guidance on whether a transaction is reportable
  • Reminders for reporting deadlines and reviewing ongoing transactions
  • Customisable dashboard to make it easier to stay on top of deadlines
  • Customisable workflow to easily collect all pertinent data
  • Built for international firms with different workflows and reporting for every relevant country

Choose from a number of hosting options, including cloud hosting and on-premises hosting

HMRC MDR consultation

On 30 November 2021, HMRC published their draft UK Mandatory Disclosure Rules and released their consultation which seeks views on the design of the draft regulations. The consultation will be open until 8 February 2022.

At the Spring Budget 2021, the UK Government announced that it would implement Mandatory Disclosure Rules(MDR)(2.14). The rules are intended to replace the similar EU DAC6 rules which were implemented in the UK prior to their exit from the European Union. The draft regulations draw closely to the OECD’s Model Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures.

MDR requires advisers (and sometimes taxpayers) to report information to the tax authorities on certain prescribed arrangements and structures including those that could circumvent existing tax transparency reporting rules known as the Common Reporting Standard or hide ownership of assets. 

VinciWorks will be hosting a webinar in the coming weeks with representatives from HMRC to discuss the consultation.

DAC6 legislation in Malta requires that an intermediary who is exempt from reporting in Malta (such as those who rely on legal professional privilege) must provide the Commissioner for Revenue with an annual updated situation including a list of the reportable cross-border arrangements that were not reported.

On 11 November 2021, the Maltese Commissioner for Revenue announced that the deadline for the notification needs to be submitted by 28 February 2022 for all transactions where the triggering event was met by 31st December 2021.

The annual notification form can be accessed here.

VinciWorks’ DAC6 Solution offers a tracking, auditing and reporting solution for all firms in Malta. Get in touch with us to see how Omnitrack can help ensure you are completing your reporting requirements.

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Wednesday 10 November, 12:00pm (UK)

Following multiple delays, DAC6 has now been in force in most EU Member States since January 2021. Businesses across Europe are now reporting on cross-border transactions, with many still grappling with when, how and what they need to report.

In this webinar, Director of Best Practice Gary Yantin and Head of Legal and Product Research Ruth Mittelmann Cohen discussed the challenges that intermediaries and taxpayers face, give an overview of how the different EU Member States and the UK have implemented DAC6 and reveal the reporting patterns emerging from the different tax authorities. They also gave an update on the UK’s consultation document on MDR.

The webinar covered:

  • DAC6 recap
  • Top challenges firms are facing
  • Findings from different tax authorities
  • Approaches to legal professional privilege
  • UK MDR
  • What comes next?

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It has now been over 10 months since DAC6 has been in force in most EU member states and the UK. Here are some highlights from 2021.

DAC6 reporting

While reporting got off to a rocky start for some tax authorities, the teething problems are now over and tax authorities have begun reviewing the reports they have received. VinciWorks were in touch with many tax authorities, and here is a short reporting summary of a few key member states:

Germany: As of 11 October 2021, a total of 14,047 reports have been received and accepted by the Federal Central Tax Office (BZSt).

Finland: As of 15 October 2021, roughly 250 reports have been filed in Finland. The most frequently reported hallmark categories that have been reported are C and E.

Netherlands: As of 31 March 2021, there were 4,562 reports filed. 3,254 reports were from the original historic period. 1,042 reports were from the deferral period. 265 reports related to transactions from 1 January – 31 March 2021. 

Belgium: As of 22 March 2021, the Belgium Ministry of Finance received 535 reports.

Czech Republic: As of 12th October there were 141 DAC6 reports in the Czech Republic. The majority of reports were relating to Hallmark categories D1b, C1d and the E category.

Sweden: As of 30th June 2021, the Swedish Tax Agency received 486 reports. The majority of reports related to hallmark E2 and E3. 

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The Irish Revenue’s Tax and Duty Manual Part 33-03-04 was updated in October 2021. The main amendments relate to Sections 3.2 and 4.2 which now include updated screenshots and guidance. This was necessary following the Irish Revenue releasing a new XSD schema in July 2021 reflecting the UK’s exit from the European Union. Most EU Member States have been updating their XML schemas in response to the amended DAC6 Central Directory Business Validation Rules by the European Commission.

What is the EU list of non-cooperative tax jurisdictions?

The EU list of non-cooperative tax jurisdictions is a list of jurisdictions that do not comply with all international tax standards. The list includes jurisdictions that do not yet comply but have committed to implementing reforms that will bring them to compliance. The aim of the list is not to shame the countries that appear, but rather to encourage positive change in their tax legislation and practices. Once a jurisdiction does meet all criteria to be considered cooperative for tax purposes, it is removed from the list.

October 2021 updated EU list

On 5 October 2021 the Council of the European Union released a revised list of EU non-cooperative jurisdictions for tax purposes.

The EU list of non-cooperative jurisdictions for tax purposes is a tool to tackle:

  • tax fraud or evasion: illegal non-payment or underpayment of tax
  • tax avoidance: use of legal means to minimise tax liability
  • money laundering: concealment of origins of illegally obtained money

The list contains non-EU countries that encourage abusive tax practices, which erode member states’ corporate tax revenues and underlines the importance of promoting and strengthening of tax good governance mechanisms, fair taxation, global tax transparency and fight against tax fraud, evasion and avoidance, both at the EU level and globally.

The updated EU list is important when considering DAC6 Hallmark D1 which captures arrangements where it is reasonable to conclude that these may have the effect of undermining reporting obligations under Council Directive 2014/107/EU (‘DAC 2’) and the Common Reporting Standard (‘CRS’), as implemented in the domestic legislation of EU Member States.

EU list as of April 2022

The Council of the European Union released a revised list of EU non-cooperative jurisdictions for tax purposes on 24 February, 2022. The document that includes the list states that it underscores the importance of advancing and strengthening good tax governance mechanisms, tax fairness, global tax transparency and the fight against tax evasion at both the EU and global level. 

The council welcomes the ongoing tax cooperation between the EU Code of Conduct group and most countries and territories, welcomes the progress made in certain previously less cooperative states and territories, and invites the countries and territories that remain on the list to consult with the Code of Conduct group to resolve outstanding issues. The conclusions specifically mention Turkey, recognising the country’s progress and calling on them to continue to do the work necessary to become fully compliant with the requirements.

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How VinciWorks can help?

Tax filing compliance solution

Tax departments in all organisations need to keep to strict deadlines for tax obligations such as corporation tax, payroll and VAT payments. This often gets even more challenging when dealing with multiple jurisdictions. 

Omnitrack, VinciWorks’ data collection tool, allows you to record, manage and complete all tax filing requirements. From setting filing deadlines, choosing a warning notice period and recording the obligation fulfilment, Omnitrack has you covered. Get in touch with us to see how Omnitrack can help your business.

Continuing their open communication policy, the Dutch MDR team released details of the DAC6 reports submitted to the Dutch tax authorities in January and February 2021. 

There were 4,429 disclosures made between 1 January 2021 and 28 February 2021. 4,259 of the disclosures were for reports in the historical period from 25 June 2018 until 31 December 2020. Only 170 reports related to new transactions. In total 5035 different hallmarks were reported. 35% of hallmark disclosures related to intra-group cross border transfers, covered by hallmark E3. 25% of hallmarks reported concerned the different characteristics of the C1 hallmarks .Hallmark B2, relating to income conversion accounted for 14% of disclosures. 

Below is a summary of the hallmarks that were reported during the period. Some transactions may have contained multiple hallmarks. 

A1: Conditions of confidentiality:

A2: Fee agreements: 3 

A3: Standardised documents or structures: 33 

B1: Acquiring loss making companies:

B2: Income conversion: 723 

B3: Circular transactions: 228 

C1a: Deductible cross border payments: 346 

C1bi: Low or tax exempts recipients: 316 

C1bii: Blacklisted recipient country: 282 

C1c: Hybrids: 90 

C1d: Preferentially taxed recipients: 268 

C2: Same depreciation: 13 

C3: Double taxation: 41 

C4: Transfer of assets: 382 

D1: Undermining reporting obligations: 17 

D1: Other: 59 

D2: Ownership chains: 25 

E1: Unilateral safe harbour rules: 258 

E2: Hard to value intangibles: 357 

E3: Intra group cross border transfers: 1586 

Total hallmarks reported: 5,035

DAC6 reporting dashboard

VinciWorks’ DAC6 Solution offers reporting solutions for international firms for MDR regulations in many jurisdictions including the Netherlands. Get in touch with us to see how Omnitrack can help ensure you are completing your reporting requirements.