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.
UK Reporting Mechanism: Reporting has begun. HMRC will not be changing the XML schema or reporting methods. The XML upload portal is now open. The manual reporting will be open in the coming weeks.
Arrangement Reference Number from an EU Member State: HMRC will accept an Arrangement Reference Number from an EU Member State as evidence of reporting a DAC6 arrangement. Therefore, if a report is made in an EU Member State, HMRC will not expect an additional report to be made in the UK.
UK MDR Timeline: There is no confirmed timeline at the moment and all is still subject to change. HMRC will look to implement as soon as practicable. The expectation is that HMRC will produce some draft legislation for a consultation later this year, with the hope to lay before parliament towards the end of this year. But that’s still very much subject to change.
It is unlikely that reporting under the UK MDR regime would start in 2021.
What to expect from UK MDR: The UK will not become a tax haven. The DOTAS regime gives the UK a lot of information they need about tax avoidance, and DOTAS also includes a lot of information covered by DAC6. In all likelihood, the UK MDR legislation will just follow Hallmarks D1 and D2 closely as that is the OECD expectation.
You can listen to our full interview with James by listening to our podcast.
Get in touch with us to see how Omnitrack can help ensure you are completing your reporting requirements.