The UK government has implemented legislation that requires taxpayers and their advisers to disclose details of certain cross-border arrangements to HMRC as part of a crack down on tax avoidance.
The Council Directive (EU) 2018/822 (DAC6) requires intermediaries such as tax advisers, accountants and lawyers to report to their national tax authority any cross-border tax planning schemes in which they are involved if the scheme bears 'hallmarks' showing it to be potentially 'aggressive avoidance'.
Under the directive, EU Member States will exchange this information through a central database. There is a 30-day window for a report to be made.
The primary reporting obligation will fall on intermediaries, which includes those who design and market cross-border arrangements, and those who provide aid, assistance or advice in respect of such arrangements.
UK tax authority HMRC published draft guidance and legislation for DAC6 implementation on 22 July 2019, but professional bodies criticised the proposals as too broad. In particular, there were concerns about the penalty regime, the risk of over-reporting and the interaction of the rules with legal professional privilege.
The UK government has now amended the legislation to ensure the rules are effective and proportionate.
In particular, HMRC says it recognised concerns raised during the consultation about the penalty regime, the risk of over-reporting, and the interaction of the rules with legal professional privilege (LPP).
If an intermediary has reasonable procedures in place to secure compliance with these rules, this will be taken into account in determining whether they have a reasonable excuse for a failure.
The default position will be a one-off penalty of up to GBP5,000, with daily penalties applying only in more serious cases, and subject to review by an independent tribunal.
The regulations come into force on 1 July 2020. Reports for arrangements entered into from 25 June 2018 to 30 June 2020 will be due by 31 August 2020.