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In brief

Following the signing of the EU–UK Trade and Cooperation Agreement on 30 December 2020, the UK Government has announced that it will cease to participate in the EU mandatory disclosure regime known as DAC6, for which reporting was due to commence from January 2021. The UK will implement a lighter reporting regime based on the OECD’s Mandatory Disclosure Rules (“MDR”) set out in BEPS Action 12. As a transitional measure with immediate effect, DAC6 reporting will only be required for certain specific arrangements concerning automatic exchange of information and beneficial ownership.


The EU mandatory disclosure regime known as DAC6 has applied since 1 July 2020 and reporting obligations were set to begin in the UK and most other EU member states in January 2021.

Under the wide-ranging DAC6 regime, intermediaries (such as lawyers, accountants and tax advisors) must report certain cross-border arrangements within 30 days of a “reporting trigger”, such as the first step of implementing the arrangement. The regime also had retrospective effect with reporting required for arrangements whose first step was implemented in the period since 25 June 2018 to EU tax authorities. The reporting obligation reverts to the taxpayer where there is no intermediary involved or legal professional privilege prevents the intermediary from reporting.

Arrangements are in scope if they involve either two EU member states or one EU member state and a third country and the transaction contains certain “hallmarks” (characteristics that indicate potentially aggressive tax planning). There are 15 separate hallmarks in total in five categories (A to E). Some of these hallmarks apply even where obtaining a tax advantage is not the main benefit, or one of the main benefits, of the arrangement. Failure to report could result in significant penalties, which vary considerably among member states and which, in limited cases, include criminal liability. The maximum penalty in the UK for reporting failures was GBP 1.0 million (USD 1.4 million).

There has been a reporting regime in place in the UK since 2005, requiring intermediaries to report certain tax avoidance schemes. However this is significantly narrower than DAC6, with a limited range of hallmarks. The UK implemented the DAC6 regime in January 2020, as required under EU law, and intermediaries and taxpayers have been preparing for compliance with the obligations of the reporting regime by establishing policies, systems and processes for reporting. They have also been undertaking exercises to collate lists of historical reportable arrangements that were implemented in the period between 25 June 2018 and 31 December 2020 that were due to be reported early in 2021.

Transition from DAC6 to OECD MDR

Following the signing of the free trade agreement with the EU on 30 December 2020, HMRC announced that the UK Government had legislated for changes to The International Tax Enforcement (Disclosable Arrangements) Regulations 2020 (the legislation that transposed DAC6 into UK law). The amendment to the regulations was laid before parliament on 31 December 2020 and came into effect immediately.

Under the amended legislation only those arrangements which meet hallmarks under Category D of DAC 6 will need to be reported. This means that arrangements that would have been reportable under hallmarks other than Category D will not need to be reported, even if the relevant arrangements were implemented before 31 December 2020.

The two hallmarks in Category D concerned automatic exchange of information and beneficial ownership and are quite limited in scope. Most of the challenges with the DAC6 reporting regime were linked to the other categories of hallmarks, including hallmarks in Category E (transfer pricing) and Category C (specific cross-border transactions). Therefore limiting reporting to the Category D hallmarks substantially lightens the compliance burden on intermediaries and taxpayers in the UK.

The UK is required to continue to have reporting in respect of the Category D hallmarks under the terms of the free trade agreement, which imposes an obligation on the UK not to “…weaken or reduce the level of protection provided for in its legislation at the end of the transition period below the level provided for by the standards and rules which have been agreed in the OECD at the end of the transition period, in relation to…the exchange of information…concerning…potential cross-border tax planning arrangements”. HMRC explained that this means that the UK must not reduce the level of protection in its legislation below the level of protection afforded by the OECD’s model Mandatory Disclosure Rules (“MDR”). It is only arrangements containing category D hallmarks that would be reportable under the MDR and therefore all other DAC6 reporting will not be necessary in the UK.

According to HMRC, the UK Government will repeal the legislation implementing DAC 6 in the UK and implement the OECD’s MDR as soon as practicable during 2021.


Patrick O'Gara is a partner in Baker McKenzie's Corporate Tax department in London.


Oliver Pendred is a partner in Baker McKenzie's tax practice in London. He is a chartered accountant and chartered tax adviser providing corporate and international tax advice to multinational clients. Prior to joining Baker McKenzie, he was a director at a Big Four accounting firm.