At the end of the Brexit transition period many EU directives and other regulations ceased to apply to the UK. Despite that, the Government had previously indicated that it had no intention of abandoning the implementation of the EU Directive on administrative cooperation (Council Directive 208/822), commonly known as DAC 6, concerning the reporting of cross-border tax arrangements, many of which are often perceived to facilitate tax avoidance.
As a result of the EU-UK Trade and Cooperation Agreement, the regulations implementing DAC 6 have been amended, so that the UK will no longer be fully adopting these reporting requirements.
The UK will instead implement the OECD (Organisation for Economic Co-operation and Development) mandatory disclosure rules as soon as practicable, in order to transition to international, rather than EU standards on tax transparency. This represents a significant reduction in the UK tax reporting requirements, with the OECD rules effectively only requiring arrangements to be reported if they undermine reporting obligations, or involve non-transparent legal or beneficial ownership, offshore entities, or structures with no economic substance.
Whilst providing a welcome bonus for some advisers and participants in cross-border arrangements, this relaxation may create additional burdens for others. In particular arrangements involving EU states, which could previously have been dealt with by a report to HMRC, may now need to be reported within an EU jurisdiction instead, leading to additional administrative burdens.
As the draft legislation to implement the OECD rules has not yet been published, it is also not known for certain what the new reporting regime will look like. It may, therefore, be too early to be celebrating what some may see as a Brexit dividend, but others see as a barrier to tackling abusive tax arrangements.