Benign or commercial arrangements with no tax motive can routinely be caught and require reporting.
ICAEW Tax Faculty has responded to the International Tax Enforcement: disclosable arrangements consultation in particular the draft guidance and legislation published by HMRC on 22 July 2019. The response is published as ICAEW REP 108/19 .
These new measures will require the mandatory automatic exchange of information between EU states in relation to cross-border arrangements which meet one or more hallmarks. The intention is that tax authorities will discover and be able to react promptly to tackle aggressive tax arrangements. However, it is important to note that the rules are much wider than the existing UK rules on the Disclosure of Tax Avoidance Schemes (DOTAS) and benign or commercial arrangements with no tax motive can routinely be caught and require reporting. It is therefore imperative that those advisers involved in transactions which have an EU footprint consider their obligations under the Directive on an ongoing basis as it will not always be immediately apparent that an arrangement is caught. To make matters more complex, retrospective reporting of historic arrangements as far back as June 2018 will also be required by 31 August 2020.
Summary of representation
The representation acknowledges the policy to increase transparency to revenue authorities about tax arrangements that involve tax avoidance.
However, several concerns are raised in the representation. A substantial proportion of these concerns are linked to the fact that these proposals appear too widely targeted and likely to impose considerable extra admin burdens and costs on the ordinarily compliant. The number of reports submitted is likely to be far in excess of those that are the intended target. Further, we anticipate that there will be multiple reporting of the same transactions, not only across different jurisdictions but by multiple UK advisers who are ‘intermediaries’.
The amount of information received by HMRC is likely to be far in excess of what should be required and this will not be helpful in achieving the policy objective as it will make it far more difficult to identify the arrangements that really should be reportable.
The Tax Faculty recently hosted a webinar on this subject. This included a regulatory overview and update from HMRC’s Policy Lead followed by contributions from Deloitte discussing the impact of these rules in practice including the challenges faced by tax advisers. This webinar is available to Tax Faculty members. You do not have to be an ICAEW member to join the Tax Faculty.
Any questions concerning the consultation should be sent directly to firstname.lastname@example.org