The E.U. Council Directive 2018/822 ("DAC6") provides for the mandatory disclosure by intermediaries, or individual or corporate taxpayers, to H.M.R.C. of certain cross-border arrangements and structures that could be used to avoid or evade tax and the mandatory automatic exchange of this information among E.U. Member States. A cross-border arrangement is reportable if it meets one or more hallmarks.

From January 2013, the E.U. introduced the Directive of Administrative Co-operation and, over time, Directive of Administrative Co-operation has evolved to include the automatic reporting of various matters. It now includes directors' fees, employment income, insurance premiums, pension income and income from and ownership of immovable property.

Member States are required to have implemented DAC6 into national law by December 31, 2019 and to apply the provisions by July 1, 2020. Reportable cross-border arrangements, where the first step is undertaken between June 25, 2018, and July 1, 2020, will need to be reported by August 31, 2020. The timetable has been affected by the COVID-19 virus, as discussed below.

WHO IS AN INTERMEDIARY?

An intermediary is any person that designs, markets, organizes or makes available for implementation or manages the implementation of a reportable cross-border arrangement. An intermediary can be an individual, a company or a trustee.

The definition of an intermediary envisages two types of intermediaries: "promoters" and "service providers." Promoters are those who design and implement the arrangements, while service providers are those that provide assistance or advice in relation to the arrangements. The reporting obligation is fundamentally the same, but there is a knowledge-based defense available to service providers, which means that they do not have an obligation to report when the defense is applicable. No equivalent defense exists for promoters.

An intermediary is a person that meets one of the following conditions:

  • It is resident in the U.K. for purposes of U.K. tax.
  • It has a permanent establishment in the U.K., through which it provides services in respect of the arrangement.
  • It is incorporated in the U.K., or governed by the laws of the U.K.
  • It is registered with a professional association relating to legal, taxation, or consultancy services in the U.K.

Where information relating to a reportable arrangement is covered by legal professional privilege, the legal counsel is not required to report that information to H.M.R.C. Where legal counsel chooses not to disclose information because of a legal privilege enjoyed by the client, an obligation is imposed to inform other intermediaries or relevant taxpayers of their own reporting obligations, as the reporting obligation passes to other intermediaries or or the relevant taxpayer.

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Originally published June 2, 2020.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.