Lawyers are exempt from Canada’s MDR until at least October 20, 2023.
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, but compliance will now be delayed until at least October 20, 2023.
HMRC has just unveiled its most recent guidance concerning the UK Mandatory Disclosure Rules (MDR). These rules introduce a fresh set of responsibilities for taxpayers and their advisors, compelling them to report Common Reporting Standard (CRS) Avoidance Arrangements and Opaque Offshore Structures. It’s crucial to note that the information gathered through these reports will be shared with other tax authorities that are also enforcing equivalent regulations.
CRS avoidance arrangements and Opaque Offshore Structures are defined in the Overseas for Economic Cooperation and Development (OECD) Model Mandatory Rules for CRS Avoidance and Opaque Offshore Structures (Model Rules). The legislation implements these Model Rules.
In November 2022 HMRC released the summary of responses from their consultation on the UK’s Mandatory Disclosure Rules (MDR).
The consultation clarified that:
The historic lookback period will go back to 25th June 2018 (and not 29th October 2014 as originally stated).
Reporting will be via XML only.
With UK MDR expected to come into force in the first half of 2023, Vinciworks was joined by John Sandeman, HMRC’s policy official for Mandatory Disclosure Rules, who helped our listeners get to grips with the UK MDR and how it may impact your organisation.
The webinar covered:
What are the key differences between UK DAC6 and UK MDR?
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.
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.
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.
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.
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.
The Mandatory Disclosure Rules (MDR) in the UK are a set of regulations that aim to combat tax evasion and promote tax transparency. These rules require certain taxpayers and their advisors to disclose specific information to the tax authorities regarding certain types of cross-border transactions and arrangements.
The MDR framework is designed to enhance tax compliance and ensure that relevant tax authorities receive timely and relevant information about potentially aggressive tax planning. It helps tax authorities identify and scrutinise transactions that may involve tax evasion or abuse. By having access to comprehensive information, tax authorities can take appropriate action to protect the integrity of the tax system and prevent tax avoidance.
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.