DAC6 delays - when do we report?
HMRC have released an update on their current approach to reporting under DAC6, bearing in mind the impact that the Covid-19 pandemic is having on taxpayers and intermediaries who will need to report.
DAC6 was passed in May 2018 and has been incorporated into UK law by regulations that will have legal effect from 1 July 2020. The effect of DAC6 is to place an obligation on intermediaries (such as accountancy firms, and in some cases law firms) to report on cross-border arrangements meeting certain criteria, going back until 25 June 2018.
The first reports are due to be sent to HMRC from 1 July 2020, and with a deadline of 31 August for pre-existing arrangements (which must be reported as part of a look-back process). However, there are clearly difficulties and unexpected challenges because of Covid-19. In particular, intermediaries may not have the normal resources to train employees, develop clear and consistent procedures and establish new IT systems. In addition, where ‘hard copy’ records need to be checked to consider whether there are DAC6 implications, this is obviously difficult in the present circumstances.
Stakeholders have therefore been requesting a postponement for these reporting obligations. The EU Commission has responded to this, proposing a deferral of certain deadlines under DAC6. The proposal is to allow three additional months for reporting, with the possibility of allowing up to three further months ‘depending on the evolution of the Coronavirus pandemic’. However, so far, there has been no postponement, as such, of the implementation of DAC 6 – as matters stand, the rules will still come into force on 1 July 2020. Taxpayers and intermediaries should therefore still be preparing for their reporting obligations and ensuring that they continue to develop proper procedures.
In the meantime, HMRC have said that if reports are made late as a result of the issues with Covid-19, no penalties will be due where there is a ‘reasonable excuse’ for the delay and reports are made without unreasonable delay once that excuse has ceased. This can perhaps be seen as a holding position, pending a legally effective resolution by the relevant EU institutions to push back deadlines for reporting.
HMRC recognises the challenges taxpayers and intermediaries face in implementing DAC6 because of Covid 19 and the unprecedented measures introduced to tackle it. In particular, we understand the various challenges in developing and introducing the necessary IT systems, processes and procedures, training staff and identifying reportable arrangements for periods back to June 2018.
