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

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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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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 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

Watch now

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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.