Today, HMRC launched its long awaited UK mandatory disclosure rules (MDR) consultation process. The process seeks views on the design of draft disclosure regulations which, when introduced, will implement the OECD’s model MDR in the UK, thereby replacing DAC6. The consultation period runs from today until 8 February 2022, with the expectation that the new UK regime will be in place by summer 2022.
Points to note from the materials published today include the following:
- the rules will cover CRS avoidance arrangements and the use of opaque offshore structures (effectively, the scope of DAC6 hallmarks D1 and D2);
- the new UK regime will take effect in summer 2022, at which time the DAC6 rules will be revoked in the UK;
- much of HMRC's DAC6 guidance will continue to have application under UK MDR, albeit with further guidance to come;
- the rules will operate at a global level, and not at the EU level only;
- while OECD principles do not explicitly require a "cross-border" component, this should be implicit in light of the scope of UK MDR;
- while DAC6 introduced a "look back" reporting period (to June 2018), UK MDR will be retrospective to 29 October 2014 (the date of publication of the CRS). This eight year "look back" could place a very heavy burden on businesses. In order to seek to address this concern, HMRC suggests a number of "limitations and mitigations". Chief among these are the application of the "look back" to CRS avoidance arrangements only, and to "promoters" alone and not also to "service providers" and taxpayers. At the same time, the value of the financial account concerned must exceed $1m in order for retrospective reporting to be required;
- where it is required, the "look back" report will need to be made within 180 days of the new rules taking effect (ie, in all likelihood, winter 2022);
- country-by-country mismatches, whether in terms of regulation or local interpretation, may now arise at a global rather than an EU level, with added uncertainty for taxpayers and intermediaries.
While today’s announcements were eagerly awaited, aspects of the proposals were not expected. We hope that HMRC will take account of the very real challenges that some businesses are likely to face here, whether in terms of retrospection, regime interpretation, or otherwise.