United Kingdom

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Personal scope of application As per 26 June 2022

Are there any deviations from the Directive in defining the intermediary?

2021/06/17

Yes - there is clarity that an employee of an employer cannot be an intermediary, where the employer is an intermediary or relevant taxpayer in relation to the cross border arrangement.

How is an intermediary defined? Is there a differentiation between a corporate entity and an individual person?

2021/06/17

Subject to the above point on employees, intermediary is defined as per the Directive (DAC) Article 3(21)

Can a corporate tax department (or its members) within a MNE or within a group of entities qualify as an intermediary?

2021/06/17

There is no exception from a group company being able to meet the definition of intermediary. HMRC specifically envisage this possibility. See IEIM62170 (https://www.gov.uk/hmrc-internal-manuals/international-exchange-of-information/ieim621070).

How are the actions of designing, marketing, organizing, making available for implementation or managing the implementation of a tax arrangement defined?

2021/06/17

These actions are not defined.

Have the legal preconditions regarding the territorial nexus for an intermediary been implemented in accordance with the Directive?

2021/06/17

There are no deviations from the directive.

Are there any other conditions apart from those of the Directive, such as the territorial nexus of a tax arrangement to a certain Member State, which trigger a reporting obligation of an intermediary (e.g. including intermediaries from outside the EU)?

2021/06/17

There are no deviations from the directive.

In which cases is the relevant taxpayer obliged to report? Are there deviations from the Directive?

2021/06/17

There are no deviations from the directive, other than the only requirement is for reporting a cross border arrangement where hallmark D is relevant. The UK plans to consult in 2021 on further rules to align its own legislation more closely with the OECD mandatory disclosure rules. As the UK rules may change - it will be necessary to take advice on the latest status of the UK rules.

Are there any other persons beside intermediaries or relevant taxpayers obliged to report?

2021/06/17

There are no deviations from the directive

Are there any deviations from the Directive in defining the relevant taxpayer?

Mechanism to avoid multiple reporting

Which measures have been taken to avoid multiple reporting obligations referring to an intermediary obliged to report in several countries? Are there deviations from the Directive?

2021/06/17

There are no deviations form the directive.

Which measures have been taken to avoid multiple reporting obligations referring to more than one intermediary obliged to report? Are there deviations from the Directive?

2021/06/17

There are no deviations from the directive

Which measures have been taken to avoid multiple reporting obligations referring to a relevant taxpayer obliged to report several countries? Are there deviations from the Directive?

2021/06/17

There are no deviations from the directive.

Which measures have been taken to avoid multiple reporting obligations referring to more than one relevant taxpayer obliged to report? Are there deviations from the Directive?

2021/06/17

There are no deviations from the directive.

How does the National Tax Authority expect the conditions for exemption from filing a report to be met?

2021/06/17

Receipt of an ARN from another intermediary or relevant taxpayer will be sufficient for the recipient to be satisfied that a report has been filed by that other intermediary. The recipient can rely on this without doing any additional work to check the ARN is genuine, unless they have any reason to suspect that the report has not been submitted. However the recipient intermediary will have to undertake some due diligence in respect of the intermediary providing the ARN.

Material scope of application

Are national tax arrangements subject to reporting under the Directive?

2021/06/17

National tax arrangements are not subject to report under EU DAC6. There are different reporting arrangements for certain national tax arrangements.

Which taxes are affected? Are there deviations from the Directive?

2021/06/17

There are no deviations from the directive.

Does the hallmark catalogue deviate from the Directive? If yes, to what extent?

2021/06/17

Yes, only cross-border arrangements concerning hallmark D must be reported.

Which hallmarks are linked with the main benefit test?

2021/06/17

There are no deviations from the directive (though only hallmark D is reportable).

How is the main benefit test defined?

2021/06/17

There are no deviations from the directive.

How is a tax advantage defined?

2021/06/17

For the purpose of the main benefit test, "tax advantage" is defined as including: a) relief or increased relief from tax,b) repayment or increased repayment of tax,c) avoidance or reduction of a charge to tax or an assessment to tax,d) avoidance of a possible assessment to tax,e) deferral of payment of tax or advancement of repayment of tax, andf) avoidance of an obligation to deduct or account for tax,where the obtaining of the tax advantage cannot reasonably be regarded as consistent with the principles on which the relevant provisions that are relevant to the cross-border arrangement are based and the policy objectives of those provisions.

Are there any deviations from the Directive in defining a cross-border arrangement?

2021/06/17

There are no deviations from the directive, other than that only those exhibiting hallmark D need to be reported

Is there a white list defining arrangements explicitly excluded from a reporting obligation? If yes, please provide details.

2021/06/17

There is no white list.

Are there any deviations from the Directive in defining associated enterprises?

2021/06/17

There are no deviations from the Directive.

Reporting process

When is a cross border arrangement made available for implementation (e.g. handover of contract documents)?

2021/06/17

A sample of the guidance is: "An arrangement can be made available to a relevant taxpayer in many different ways. A taxpayer could approach a promoter seeking advice or ideas, and the promoter could make available an arrangement in response to that request. Equally, an arrangement could be made available in the course of other work between an intermediary and a client, if, for example, the intermediary identifies a potential need, and suggests the arrangement as a solution. Equally, an arrangement could be proactively made available to prospective clients through a marketing campaign."

When is a cross-border arrangement ready for implementation?

2021/06/17

An extract from the guidance is: "An arrangement could be ready for implementation before it is made available for implementation. This could be the case if a promoter has finalised the design of an arrangement, but decided not to promote it to potential clients until a later date, for example, because the arrangement relied on legislation which had not yet come into force. If the arrangement is sufficiently finalised that it could be implemented by a client, then it will meet this test."

When has the first step in the implementation of a cross-border arrangement been made?

2021/06/17

HMRC guidance comments "When the first step of an arrangement is implemented is a question of fact."

Which information should be included in the report? Are there deviations from the Directive?

2021/06/17

There are no deviations from the directive

What does the reporting process look like? Are there deviations from the Directive?

2021/06/17

There are no deviations from the directive

Is the entire report to be provided by the intermediary/relevant taxpayer? Who must provide the report?

2021/06/17

There are no deviations from the directive.

What are the respective deadlines for the intermediary and the relevant taxpayer to file the report? Are there deviations from the Directive in terms of filing the information within 30 days?

2021/06/17

There are no deviations from the directive.

Which numbers are assigned by local tax authorities to the cross-border arrangements?

2021/06/17

There is no specific guidance.

What is the reporting deadline for arrangements the first step of which was implemented between 25 June 2018 and 30 June 2020?

2021/06/17

2/28/2021

When is the reporting deadline for arrangements for which the event triggering the reporting obligation lies between 1 July 2020 and 31 December 2020?

2021/06/17

1/30/2021

When is the reporting deadline for arrangements for which the event triggering the reporting obligation lies after 1 January 2021?

2021/06/17

30 days in line with the directive.

Penalties

In which cases are penalties imposed?

2021/06/17

'There are penalties for primary failures as follows: 1. Failure of an intermediary to comply with the initial reporting obligation for an intermediary.2. Failure of an intermediary to comply with the quarterly reporting obligation for marketable arrangements3. Failure of a relevant taxpayer to comply with the initial reporting obligation4. Failure of an intermediary to notify an intermediary or relevant taxpayer where legal professional privilege applies.5. Failure to notify an arrangement reference number to other intermediaries and relevant taxpayers within 30 days of receipt of the arrangement reference number.6. Failure to comply with a requirement to provide information or documents as reasonably requested by HMRC.

What are the penalties?

2021/06/17

'The default position for a primary failure is a one-off penalty of no more than £5,000. If the penalty is considered inappropriately low, HMRC can apply to a Tribunal for a higher penalty of up to £1m. A daily penalty for continuing failure can apply of up to £600 per day. A separate regime applies for a failure to make an annual report under regulation 5. These penalties are set out in regulation 14(6). Any such penalty must not exceed the relevant sum. The relevant sum is £5,000 in the case of a first failure within 36 months, £7,500 for a second failure and £10,000 in the case of a third failure and any subsequent failure during that period.The period is the 36 month period prior to the date on which the failure in question began. The previous failures do not have to relate to the same reportable cross-border arrangement.

Is a distinction made between penalties imposed on intermediaries/relevant taxpayers/other persons obliged to report?

2021/06/17

To the extent that the penalty relates to a failure of a relevant taxpayer rather than an intermediary, yes.

What are the penalties in case of redundant reports? A redundant report is a report, which was filed, although there is no obligation to file one.

2021/06/17

There are no penalties for redundant reports.

Do the penalties differ with regard to incomplete, incorrect, missing or late reports? Are there any gradations?

2021/06/17

There are limits expressed for each penalty, but the actual amount of penalty is at the discretion of HMRC or the Tribunal as appropriate.

Are arrangements the first step of which was implemented between 25 June 2018 and 30 June 2020 treated differently in the means of penalties?

2021/06/17

The penalties do not differ.

Other aspects

Do already other reporting regimes on cross-border arrangements exist?

2021/06/17

No other disclosure regimes exist, unless the arrangement has a main tax avoidance purpose (in relation to UK taxes) and meets certain specified criteria (the DOTAS regime principally for direct taxes, or DASVOIT regime for indirect taxes.

Are there any other special deviations from the Directive? 

2021/06/17

The only other deviation from the Directive is that the UK applies the rules to 'states' defined as EU member states and the UK.

What is the name of the national Tax Authority responsible for DAC6?

2021/06/17

HM Revenue and Customs

Do any other obligations apart from reporting a reportable cross-border arrangement exist under the national DAC6 legislation? (i.e. indication of the arrangement in the tax return)

2021/06/17

A relevant taxpayer using a cross border arrangement must include disclosure of the use of that arrangement on their annual tax return for the year in which the arrangement was made available to them, and in each subsequent year in which it is used. Intermediaries must report every three months on any clients who use marketable arrangements.

Professional privilege/secrecy

Who is primarily obliged to report? Is there a primary reporting obligation of the intermediary or the relevant taxpayer? Is there legal privilege and in how far has it been considered for allocating the reporting obligation?

2021/06/17

The intermediary has the primary obligation to report. There are also on-going obligations on the relevant taxpayer to report. There is nothing requiring the reporting of legally professional privileged information, but an intermediary with legal professional privilege is required to inform any other intermediary, or if none, the relevant taxpayer of the obligation to report.

Does the reporting obligation breach a legal professional privilege under national law?

2021/06/17

No.

Does the national law make reference to professional privilege or professional secrecy?

2021/06/17

Professional privilege.

What is the difference, as per the national law, between professional privilege and professional secrecy?

2021/06/17

There is no guidance.

To which categories of intermediaries does the professional privilege or professional secrecy apply?

2021/06/17

Privilege applies to advice given by external lawyers and also by in-house lawyers, provided that they act in their capacity as lawyer and not in an executive or compliance capacity and are qualified to practise under the rules of the regulator, which in England and Wales means the Solicitors Regulation Authority (SRA) or the Bar Council. For solicitors this means holding a current practising certificate. Privilege extends to employees such as legal executives, trainee solicitors and paralegals provided that they are supervised by qualified lawyers. Privilege will also extend to the advice given by foreign lawyers, provided they are acting in their professional capacity in connection with the provision of legal advice. It is not necessary or relevant to consider the training and experience of an individual foreign lawyer in order for legal advice privilege to apply in the case of a foreign lawyer - legal privilege should apply to anyone who acts as a lawyer in a foreign jurisdiction. Privilege does not apply to other professionals such as accountants giving legal advice.

In the context of the reporting obligation, under which conditions are the intermediaries entitled/obliged to make use of professional privilege or professional secrecy?

2021/06/17

“privileged information” means information with respect to which a claim to legal professional privilege, or, in Scotland, to the confidentiality of communications, could be maintained in legal proceedings. It refers to discussions between a lawyer and their client.

In cases in which professional privilege or secrecy applies, please describe the procedure for notification.

2021/06/17

Nothing in the UK EU DAC6 Regulations requires a UK intermediary to disclose any privileged information. Subject to this proviso, a UK intermediary must notify any other intermediary, or, if none, the relevant taxpayer, as soon as reasonably practicable of the reporting obligations of a UK intermediary or a UK relevant taxpayer as the case may be, in relation to the reportable cross-border arrangement to which the privileged information relates.

Does the national law provide specific conditions to waive professional privilege or professional secrecy?

2021/06/17

In the UK legal professional privilege operates between the client and their lawyer until it is waived by the client.

Vesko Petkov
UK and International Tax Partner