Following the UK-EU FTA negotiations, a significant reduction in the scope of DAC 6 reporting in the UK has been announced.
Following the Free Trade Agreement (FTA) negotiations between the UK and the EU ahead of the 31 December 2020 deadline, a significant reduction in the scope of the EU mandatory disclosure rules (DAC 6) reporting in the UK has been announced. Although DAC 6 reporting in the UK will still be required for a limited time, only arrangements meeting Hallmarks D (arrangements undermining Automatic Exchange of Information (AEOI) and disguising beneficial ownership) will need to be reported. This change will apply retroactively to 25 June 2018. It should be noted that the regulations to implement the change into UK law are still only draft at this stage.
The UK will consult on draft legislation and implement the OECD’s Mandatory Disclosure Rules (MDR) recommendations under OECD Base Erosion and Profit Shifting (BEPS) Action 12. This means that DAC 6 will likely be replaced by new ‘UK MDR’ rules in the near future. The potential scope of the future rules (including whether they will go beyond the OECD proposals), and interaction with other UK disclosure regimes is unclear at this time.
Despite this reduction in scope of the UK implementation, it is important to be cognisant that businesses will no longer be able to rely on a report in the UK to discharge a reporting obligation in another territory – for example, where a reportable arrangement involving the UK and France may previously only need to have been reported in the UK, it would now need to be reported in France. UK-led businesses with operations in the EU will still need to continue preparing for compliance in the remaining 27 EU Member States as before. Therefore, businesses will still need to establish processes and procedures to identify and assess potentially reportable arrangements and make relevant disclosures where they have wider interactions with the EU.
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