HMRC publishes consultation and draft regulations implementing DAC6/ EU Mandatory Disclosure rules

HMRC publishes consultation and draft regulations

HMRC have provided insight on how the UK’s implementation of the EU’s Mandatory Disclosure rules will look and operate in practice.

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Director, Tax Policy

KPMG in the UK


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The much anticipated draft UK regulations implementing the DAC6 or EU Mandatory Disclosure Rules were issued on Monday 22 July 2019, alongside a consultation document. The documents provide further details for intermediaries and taxpayers who, as of 1 July 2020, may be required to disclose to HMRC details of certain types of cross-border arrangements and structures that meet certain hallmarks or criteria. The draft regulations draw directly from the EU Directive, which is already in effect for transactions implemented on or after 25 June 2018. The consultation which is meant to serve as a starting point for fleshing out guidance, provides clarity on elements of DAC6’s scope, the hallmarks and certain administrative details of the regime. More detailed local implementation guidelines are expected to be issued by the end of the year.

The Directive on Administrative Cooperation was formally amended and entered into force on 25 May 2018 to provide for new mandatory disclosure rules but left it up to Member States to publish regulations and administrative provisions necessary to comply with the Directive by 31 December 2019.

Through the draft regulations and consultation document, HMRC have signaled various clarifications. These are important developments given that DAC6 is already in play. Despite the 1 July 2020 application date, reportable cross-border arrangements, the first step of which is implemented between 25 June 2018 and 1 July 2020, must also be reported by 31 August 2020.

Key takeaways


Contrary to the stance taken by some Member States, the draft regulations do not expand the scope of the Directive. In fact, the regulations pull in DAC6 definitions in many places (for example for the definition of ‘hallmarks’).

The consultation also states that Brexit is not expected to affect the process of implementation of these rules (or lead to their later repeal).

For the rules to apply, a cross border arrangement must exhibit at least one of a number of hallmarks. Some but not all of these require a tax advantage to arise before the hallmark can apply.

As expected, the consultation confirms that tax advantages are not limited to those arising in the EU. The reporting intermediary or taxpayer must identify tax advantages in all relevant jurisdictions.

However, HMRC have taken the view that a ‘tax advantage’ will only be considered to arise where the obtaining of the advantage “cannot reasonably be regarded as consistent with the principles on which the relevant provisions that are relevant to the reportable cross-border arrangement are based and the policy objectives of those provisions”. One of the most useful confirmations in the consultation is in relation to Hallmark E on transfer pricing. Here the document confirms that it is intended to seek disclosure of arrangements that are contrary to the OECD’s Transfer Pricing Guidelines. This may help limit the application of this hallmark somewhat given that the main benefit filter does not apply to this hallmark.


The draft regulations anticipate that reference numbers will be issued for disclosed transactions. It also anticipates that UK taxpayers will be required to report use of an arrangement by disclosing the reference number to the authorities, in most cases this will be via a white space disclosure on the tax return.

With respect to penalties, the draft regulations bring in a DoTAS approach, the highlight of which is that penalties for non or late disclosure is up to a maximum of £600 per day. The penalty is imposed by a Tribunal and can be increased or reduced at the Tribunal’s discretion subject to a maximum penalty of £1 million (and a minimum of £0).

Next steps

The publishing of the draft regulations and consultation has been anticipated for some time and provides some indication of HMRC’s direction of travel. The implementation of the regulations must take place by 31 December 2019.

There is much still to be clarified, particularly some of the more practical aspects such as how to deal with multiple disclosure obligations. It is to be hoped that these are considered in more detail in the final guidance.

The consultation closes on 11 October 2019. Please speak to your usual contact or Sharon Baynham if you have any questions on the points raised above or DAC6 generally.

For further information please contact:

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