Proposed delays to DAC 6

The European Commission has proposed extending a number of deadlines relating to the exchange of information under the Directive for Administrative Cooperation (2011/16/EU), deferring exchange of information reporting between member states for three months to 31 December 2020, and deferring the deadlines for reporting under DAC 6 on cross-border tax arrangements.

Welcoming the additional time provided by the extension, Gary Ashford, partner at Harbottle & Lewis said: ‘There are sizeable penalties for failure to comply with the new rules and Intermediaries should not underestimate the work required to identify those historic transactions that may need to be reported. It is also important that the DAC 6 rules are not just regarded to be the same as the UK DOTAS rules mark 2.0. Some of the hallmarks in DAC 6 have no link to any tax advantage and are reportable whatever the reasons. Even with the extension the timeline will be tight, particularly when many advisers are working with their clients to keep them afloat due to the Covid disruption.’

Ben Jones, partner at Eversheds Sutherland noted that ‘many businesses will be disappointed that a longer period of postponement (preferably 12 months) has not been proposed. The length and severity of continued lockdown measures across Europe is still unknown and, in any event, many businesses will inevitably need to focus resources in areas other than DAC 6 compliance well into the post-lockdown period.’

Separately, HMRC has updated its guidance on DAC 6 in its International Exchange of Information Manual in recognition of the reporting challenges faced by taxpayers and intermediaries in implementing because of Covid-19. HMRC will accept that any taxpayer or intermediary who makes a report late because of these difficulties will have a reasonable excuse (and so will not be liable to any penalties for that delay), provided the report is made without unreasonable delay after those difficulties are resolved.