HMRC's Implementation of EU Mandatory Tax Disclosure Rules

July 29, 2019

HMRC has released a consultation document in respect of its draft regulations implementing the EU mandatory tax disclosure rules that will apply from 1 July 2020 to intermediaries and relevant taxpayers in relation to reportable cross-border arrangements entered into on or after 25 June 2018. The draft regulations are expected to enter into force by 31 December 2019.


In its ongoing effort to combat tax avoidance and evasion in the EU, the EU introduced in June 2018 an EU Directive known as DAC6 to impose an obligation on intermediaries1 and taxpayers to disclose information to their domestic tax authorities on certain cross-border arrangements that could be used to avoid or evade tax.

HMRC has launched a consultation on the proposed draft regulations to implement DAC6 into UK law. From 1 July 2020, promoters, intermediaries and/or taxpayers will be required to report details of certain cross-border arrangements to HMRC that feature certain hallmarks. As the disclosure obligations will be implemented with retrospective effect to capture arrangements the first step of which took place on or after 25 June 2018, businesses should start preparing for this change now by maintaining a record of potentially reportable arrangements or ensuring that their advisers do.

Once implemented, disclosures will need to be made within 30 days of the earlier of: (i) the day on which the arrangement is made available for implementation; (ii) the day it is ready for implementation; and (iii) the day the first step in implementation is made. Where the first step of a reportable arrangement is implemented on or after 25 June 2018 and prior to 1 July 2020, any report must be submitted by 31 August 2020. The primary reporting obligation will fall on the intermediary advising on the relevant arrangements (such as law firms or accountancy firms).

Notable Points in the Consultation

The consultation aims to clarify HMRC's intended approach on certain aspects of the rules:

  • Intermediary: HMRC has helpfully confirmed that where an individual employed by an intermediary firm acts on behalf of the firm, it is the employing firm, and not the individual, who is the intermediary for the purposes of the rules. It is to be hoped that a similar approach would be adopted for partners of partnerships engaged in reportable transactions.
  • Legal professional privilege: Where information relating to a reportable arrangement is covered by legal professional privilege, lawyers will not be required to report the privileged information to HMRC (unless privilege is waived by the clients). However, where this is the case, non-privileged information will remain reportable by the lawyer and the lawyer must inform other intermediaries or relevant taxpayers of their reporting obligations in respect of the legally privileged information and the obligation in respect of the privileged information passes to the other intermediary or relevant taxpayer.
  • Main Benefit Test: There was a useful clarification in relation to the application of the tax main benefit test in that it is not likely to be triggered where the tax consequences are entirely in line with the policy intent of the tax legislation.
  • Transfer Pricing Hallmark: There was also a helpful clarification that the transfer pricing related hallmark will not be triggered purely because a UK taxpayer could benefit from the exemption for small and medium sized enterprises.
  • Penalties: The penalties for breach of the obligations have been included in the draft regulations. Depending on the breach, penalties range from £600 for each day of non-compliance or £5,000. Whilst there is currently little guidance from HMRC, there is also the possibility that HMRC may commence penalty proceedings in the First-tier Tax Tribunal and if the normal penalty "appears inappropriately low" the maximum penalty applicable could be £1 million for non-compliance if that is deemed appropriate by the Tribunal.

The consultation document unfortunately provides little further insight into HMRC’s interpretation of the various hallmarks. It is hoped that HMRC’s future guidance will provide further clarity and additional detailed examples in respect to the application of the various hallmarks.

Should you have any comments on the questions raised by the consultation document please reach out to one of the Dechert lawyers listed below, or to your industry body or to HMRC directly by 11 October 2019.


1) Intermediary is defined broadly and includes anyone who designs, markets, organises or makes available or implements a reportable arrangement or anyone who helps with reportable activities and knows or could reasonably be expected to know that they are doing so. Typically it will include legal and accountancy firms, tax advisers, banks and other advisers.

Subscribe to Dechert Updates