In December 2020 the Irish Revenue amended its DAC6 guidance to include partial reporting when legal professional privilege applies. The Revenue clarified that when only part of the specified information is privileged, then an exemption from reporting will only apply in respect of that information. New guidance is expected to be released in the coming days.
What is considered to be privileged information in Ireland?
Following discussion with Irish law firms, the Revenue have confirmed that identifying a hallmark would be considered a breach of legal professional privilege. The consensus between the firms is that they would want reassurance from the Revenue that anything reported through DAC6 would only be used for DAC6 compliance purposes.
What information can still be reported when privileged applies?
The Irish Common Law approach to privilege means that Irish lawyers would be permitted to name a taxpayer involved in an arrangement without revealing any specific details about that arrangement itself.The partial report will therefore include at a minimum the name and details of the taxpayer including their address and Tax Identification Number (TIN). With this information, the Revenue will then be able to follow up with the taxpayer to obtain additional details about the arrangement.
How will partial reports be filed in Ireland?
Right now, you cannot technically file a partial report in Ireland using the ROS process (whether manually or via an XML upload). In due time the ROS system will be amended to allow partial reports, however it is unlikely this will happen before the first DAC6 reports are due.
As a temporary solution, lawyers who wish to upload a partial report due to legal professional privilege will be required to manually fill in a return via the ‘My Enquiries’ function on ROS in order to upload an Excel file.
Which other jurisdictions require partial reports?
As of 1 January 2020, all “intermediaries” involved in cross-border arrangements in an EU member state that meet certain hallmark categories are required to begin reporting those arrangements. Some businesses are fully compliant with DAC6 while others have only recently started preparing. VinciWorks has implemented DAC6 reporting systems for over 40 firms, including seven of the top ten UK firms.
During this webinar, our experts explored best practice for reporting, regardless of where you are in this challenging compliance process. We also answered attendee questions.
The webinar will cover:
What to do if you just found out about DAC6
How different countries are implementing DAC6
The UK’s mandatory disclosure regime
Best practice for reporting in multiple jurisdictions
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;
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.
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.
Unexpectedly, and despite comments to the contrary, the UK has decided to implement its own MDR regime. Until this happens, DAC6 still applies in the UK for Hallmark D. Considering that the UK has been a leader in the fight against corruption and tax evasion, its version of MDR will possibly be broader and even more stringent.
It was an honour to host James Marshall of HMRC to discuss the UK’s changes to DAC6 post Brexit.
The webinar covered:
What changed with DAC6 in the UK?
How do these changes affect DAC6 reporting?
How will Omnitrack adapt to these changes?
What are the UK’s longer-term plans for MDR?
Answering attendee questions
A recording of the webinar is available as a podcast. You can listen to it in Apple Podcasts, Spotify etc. or directly by clicking on the button below.
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.
Does this mean that DAC6 will no longer apply in the UK?
The short answer is no.
The long answer is that the Fair Trade Agreement emphasises that the UK “shall not weaken or reduce the level of protection provided for in its legislation at the end of the transition period below the level provided for by the standards and rules which have been agreed in the OECD at the end of the transition period”. This is a reference to the OECD’s model Mandatory Disclosure Rules (MDR) and includes some elements of DAC6.
Proposed changes to Ireland’s implementation of DAC6 were announced in the Finance Bill 2020. Some of the relevant changes include:
Additional DAC6 exemptions: DAC6 will no longer apply to fees, such as for certificates and other documents issued by public authorities; and dues of a contractual nature, such as consideration for public utilities.
New intermediary exemptions: An intermediary will be exempt from making a return to the Revenue Commissioners if they receive confirmation that such other intermediary has reported, a copy of the specified information provided to the competent authority or an Arrangement Reference Number.