Advisers have been urged to remain vigilant on disclosure requirements under cross-border tax reporting rules after the government backed out of adopting EU rules.
The rules surrounding the disclosure of cross-border tax planning arrangements have changed post-Brexit with the requirements becoming less stringent for advisers.
But Rachael Griffin, tax and financial planning expert at Quilter, said while this removed a reporting burden it is important that advisers know what is expected of them early on.
Ms Griffin said: “Some providers may need to report differently as a result of this change. For instance, where arrangements were planned to be reported under the EU mandatory disclosure rules consideration will now need to be made regarding the OECD rules.
"For advisers it is critical to know what needs to be reported and whether they are subject to report or not."
At the end of the Brexit transition period many EU directives and other regulations ceased to apply to the UK.
As a result, the EU Directive on administrative cooperation (Council Directive 208/822), commonly known as DAC 6, concerning the reporting of cross-border tax arrangements, has 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, in order to transition to international, rather than EU standards on tax transparency.
But as the draft legislation to implement the OECD rules has not yet been published, it is not known for certain what the new reporting regime will look like.
Less of a burden
Some believe the new system will be less of a burden for many.
Jackie Hall, tax partner and head of employment taxes at RSM, said it marked a “significant reduction” in the UK tax reporting requirements, with the OECD rules 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.
But Ms Hall warned: “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.”
She added: “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.”
More change to come?
Gary Ashford, tax partner at Harbottle & Lewis, said the rule change indicated there would be further changes post-Brexit.
Mr Ashford said: “The UK government is wasting no time in demonstrating it will take its own path in terms of its international tax compliance obligations.
“There will be many UK tax advisers very pleased to see this change, as the complexities of DAC6 were such that there was a fear many UK advisers with little international tax compliance experience might struggle to determine whether matters were reportable or not.”
He added: “It will be interesting to see other changes that might be brought in, arguably to make the UK more competitive.”
But Robert Langston, national tax partner at Saffery Champness, said the government needed to be clearer on any rule changes it intends to make.
“There was a lot of work and investment by professional service firms in getting ready for DAC6 reporting, both identifying cases and implementing software,” Mr Langston said.
“It is disappointing that the government was not clearer on the roadmap.”
He added: “Right up until Christmas, HMRC were still working on the basis that DAC6 was going ahead; they were arranging workshops with agents to run through the reporting platform.”
Although DAC6 will be replaced, the disclosure of tax avoidance schemes (DOTAS) will continue to apply in the UK.
Under DOTAS a tax avoidance scheme promoter is required to disclose the main elements of the scheme to HMRC.
amy.austin@ft.com
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