In an effort to increase tax transparency and tackle aggressive tax planning, a sixth amendment to the EU Directive on Administrative Cooperation was made by Directive 2018/822 (colloquially known as “DAC6”) in May 2018. Introducing mandatory disclosure rules for intermediaries (and, in some cases, taxpayers) in relation to cross-border arrangements that exhibit certain “hallmarks”, DAC6 has been implemented in the UK by regulations which come into force on 1 July 2020.
Under the current timetable, the first DAC6 reports are due to take place by 31 July 2020. However, in light of the widespread disruption caused by the Covid-19 pandemic, requests for a postponement have been made to the tax authorities in many EU Member States as well as the European Commission. In the UK, the Law Society made the case for deferral of these rules, referring to “the burden they’ll place on both private and public sectors, including law firms” in the current circumstances.
In a press release issued on Friday (8 May), the European Commission proposed that, while DAC6 would still apply from 1 July 2020, various deadlines for reporting and exchanging information would be deferred for three months “to take account of the difficulties that businesses and Member States are facing at the moment with the Coronavirus crisis.”
In particular, the following deadline changes have been proposed.
- Historical reporting: the deadline for reporting “historical” cross-border arrangements that became reportable between 25 June 2018 and 30 June 2020 is deferred from 31 August 2020 to 30 November 2020.
- Post-1 July 2020 reporting: the beginning of the 30-day period for reporting cross-border arrangements that become reportable after 30 June 2020 is deferred from 1 July 2020 to 1 October 2020 (meaning that the earliest deadline for reporting such arrangements is 31 October 2020).
- Exchange of information: the deadline for the first exchange of information between Member States on reportable cross-border arrangements is deferred from 31 October 2020 to 31 January 2021.
Given “the current uncertainty regarding the evolution of the Covid-19 pandemic”, the European Commission has also provided for the possibility of a further three-month extension, resulting in a total postponement of up to six months.
Assuming that these proposals are formally adopted by the EU Council and Parliament, the UK will be required to incorporate them into domestic legislation by 31 May 2020.
This is welcome news for taxpayers who are struggling to deal with the challenges arising out of the Covid-19 pandemic. Furthermore, given that HMRC has not yet published final guidance on the regulations, the delay should help taxpayers ensure that they apply the rules in accordance with HMRC’s interpretation of them – assuming, that is, that such guidance is published well in advance of the new deadlines! However, care should be taken not to let complacency set in – ensuring full compliance with DAC6 will be a huge task for many taxpayers and intermediaries and so, where possible, preparations should continue apace.
The Commission has decided to propose deferring certain deadlines for filing and exchanging information under the Directive on Administrative Cooperation (DAC).