The Law Society of England and Wales has welcomed the fact that the European Commission published on 8 May a proposal to postpone by three months the requirement to make first reports under DAC 6. The proposal sought to push back the deadline for submitting first reports under DAC 6 to October 2020, and there is speculation that Member States are seeking to extend this further with a 6 month deferral, potentially on an optional basis.
In more detail, the Commission proposal on DAC 6 was as follows:
- Change the date for the beginning of the period of 30 days for reporting cross-border arrangements from 1 July 2020 to 1 October 2020.
- Change the date for the reporting of the ‘historical’ cross-border arrangements (i.e. arrangements that became reportable from 25 June 2018 to 30 June 2020) from 31 August 2020 to 30 November 2020.
- Change the date for the first exchange of information on reportable cross-border arrangements from 31 October 2020 to 31 January 2021.
The deferrals would relate only to the reporting obligations and so the beginning of the application of DAC 6 would remain 1 July. The reportable arrangements made during the postponement period would have to be reported by the time the deferral has terminated. The proposals also include a power for the Commission to defer commencement by a further three months should the current exceptional circumstances persist. Additionally, the proposals defer the time limit for exchanges of information on Reportable Financial Accounts under DAC 2 by 3 months, i.e. until 31 December 2020.
By way of background, DAC 6 is EU Directive 2018/822 that introduces new disclosure and reporting rules for intermediaries involved in designing and promoting cross-border schemes that have certain hallmarks related to tax and tax reporting. The Law Society of England and Wales asked HM Revenue & Customs (HMRC) whether they would consider deferring DAC 6 commencement. Their expressed view has been that there’s a strong case for deferral of DAC 6 in current circumstances, given the burden they’ll place on both private and public sectors, including law firms, so we welcomed these proposals.
In a related development, HMRC has produced additional guidance to provide clarity on how the concept of reasonable excuse will apply to the UK Regulations implementing DAC 6. It says that because of the COVID-19 situation HMRC accepts 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. Anyone in your firm who believes they will be unable to meet the reporting obligations should keep a contemporaneous record of the difficulties faced and remediation plans.
Read more about DAC 6 here.