Tax for businesses – UK DAC6 update

EU Council Directive 2011/16 is a wide ranging reporting regime introduced in recent years by the EU to increase transparency around tax avoidance and harmful tax practices. Under this regime, tax advisers, service providers and taxpayers are required to report cross-border transactions that meet certain hallmarks.

In a welcome move, HM Revenue & Customs (HMRC) has indicated that post-Brexit, much of the UK’s implementation of the DAC6 mandatory disclosure regime has been repealed. This means that much of the UK reporting that may have been required from 30 January 2021 onwards is no longer required.

DAC6 applies to cross-border tax arrangements that meet one or more categories of hallmarks. The Directive applies to arrangements that involve either two or more EU Member States, or an EU Member State and a third country. Where one or more of these categories of hallmark applies to a cross-border arrangement, this would give rise to a mandatory reporting obligation.

Each EU Member State was required to enact its own domestic rules. The UK’s domestic version of DAC6 had 15 sub-categories of hallmarks within five broad categories (Category A to E Hallmarks). A cross-border arrangement that fell within one or more of these sub-categories of hallmarks would have been a reportable cross-border arrangement (RCBA).