The EU-UK Trade & Cooperation Agreement (TCA) includes a commitment from the UK to uphold the standards and rules which have been agreed at OECD level, among others, in relation to the exchange of information on cross-border tax arrangements. However, this does not include DAC6.
Brexit eliminates DAC6 reporting obligations in the UK
As the UK has only committed to comply with the OECD information exchange standard, the UK is not required to implement DAC6. Therefore, the following applies in the UK:
- The UK no longer applies DAC6.
- The UK has committed to implementing the OECD Mandatory Disclosure Rules. However, bringing the UK legislation fully in line with the OECD standard will take some time. The interim solution is for the UK to require reporting under the hallmarks D of DAC6, which can be read as being equivalent to the OECD standard.
- Reporting will not be required under any of the other DAC6 hallmarks. This also applies for the retroactive reporting of arrangements implemented as of 25 June 2018.
- Therefore, reporting under the hallmarks D is required according to the deadlines set out in DAC6, i.e. 30 days from the relevant trigger point as of 1January 2021 and in February 2021 for the look-back period.
- It is our understanding that the UK will not have access to the EU Centralized Directory for DAC6 automatic exchange of information. Therefore, reports filed in the UK (arrangements related to the hallmarks D) will not be automatically exchanged with the EU Member States. These may be exchanged based on exchange-of-information provisions in bilateral treaties between the UK and other countries.
What is still reportable in the UK?
As mentioned, the hallmarks D remain applicable in the UK:
- D.1: An arrangement which may have the effect of undermining the reporting obligations under the Automatic Exchange of Information (AEoI, CRS).
- D.2: An arrangement involving certain non-transparent legal structures.
In practice, these hallmarks are generally not relevant for operating companies.
Which arrangements involving UK entities are still reportable?
As mentioned above, the UK will not implement DAC6 and therefore, UK entities have no DAC6 reporting obligations in the UK (with the exception regarding the hallmarks D). However, specifically, the following categories of arrangements remain reportable:
- Arrangements between UK and EU group entities. Such arrangements are reportable in the country of residence of the involved EU entity.
- Cross-border arrangements involving a UK intermediary and an EU taxpayer. As the UK intermediary no longer has any reporting obligations, the reporting obligation falls to the EU taxpayer.
Based on the above, UK companies may still have reporting obligations in the UK under hallmarks D. Furthermore, arrangements between UK and EU entities are still in scope of DAC6 but such arrangements must be reported by the EU companies involved.