HMRC have done their best Santa impression over the festive period and delivered a surprise package of their own.

The key impact is the removal of 4 out of 5 hallmarks. This will result in a much narrower implementation than previously envisaged and one that was not expected.

Reporting under UK DAC6 rules will only be required for arrangements falling under hallmark D, i.e. hallmarks A-C and E are no longer relevant. Hallmark D is concerned with the circumvention of reporting under the OECD Common Reporting Standard and/or obscuring beneficial ownership. Thus, intragroup payments, cross-border restructurings, transfer pricing arrangements, etc. should generally not be of concern under the UK DAC6 implementation.

This change is understood to also apply retroactively to historic arrangements from 25 June 2018 and thus also the reporting for historic arrangements should be limited to hallmark D.

Whilst on the surface this looks like good news for UK businesses already struggling to implement broad rules on a short timeline, we do advise some caution. For example:

• If a UK intermediary promoted a reportable arrangement under hallmark A-C or E to an EU taxpayer, the reporting obligation will fall on the taxpayer (unless there is another EU intermediary),
• If an EU intermediary planned to benefit from an exception from reporting as a result of another involved intermediary reporting the arrangement in the UK, this may no longer be feasible,
• For UK HQs that had planned to control reporting centrally, reporting will now be a more localised affair, possibly with less clear guidance and exposure to jurisdictional variance, and
• UK businesses could remain liable to report in jurisdictions that have implemented rules with an extra-territorial element, e.g. Poland.

Deloitte's view:

Everyone who was or is involved in a reportable arrangement with a UK nexus, e.g. is or works with/for a UK intermediary/taxpayer, should carefully analyse the impact of the new rules. Some may be happy and find themselves in a non-reporting situation as a result of the changes. Others may need to find a last minute solution to comply with the January/February 2021 reporting deadline (see previous blog post) where it was originally planned to report in the UK but reports must now be submitted to another EU country.

If you would like to discuss this topic further, please reach out to our key contacts below

Key contacts

Brandi Caruso - Partner, Financial Services Tax & Legal

Brandi heads Deloitte’s Financial Services Tax team in Switzerland and Liechtenstein. She has extensive expertise in advising the Swiss financial services industry on the implementation of U.S. and international transparency regimes (including QI, FATCA, Section 871(m), CRS, MDR and DAC6). Brandi leads the Financial Services Tax team efforts related to innovative technology solutions. Brandi is a U.S. Certified Public Accountant and has 20 years of experience with Deloitte and has worked in London and San Diego.

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Michael Grebe - Director, Financial Services Tax

Michael is a Director in the Financial Services Tax practice. He advises banks, trust companies, and insurers in relation to the interpretation and implementation of the global transparency related regimes. He has over ten years of experience in the financial industry covering a broad spectrum ranging from Process- over Project- to Product- Management. Prior to joining Deloitte, he led the FATCA and CRS implementation project for a global financial institution.

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Karim Schubiger – Director, Financial Services Tax 

Karim leads the Tax Transparency team in the Suisse Romande and Ticino markets within the Financial Services Tax & Legal practice, responsible for services related to QI, FATCA, CRS, 871(m) and DAC6. He is a technical advisor and subject matter expert to financial institutions in the banking, trust, and insurance sectors. Prior to joining Deloitte, Karim worked for eight years in support teams of Swiss banks, in particular in areas such as operations, project and change management as well as operational taxes.

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Robin King - Senior Manager, Financial Services Tax

Robin is a Senior Manager working in Financial Services Tax. He is currently advising leading Swiss universal and private banks, acting as subject matter expert in the area of QI, FATCA , CRS and DAC6. Robin is the author of several articles on CRS. Prior to joining Deloitte, he worked as a cross-border tax compliance expert at a Swiss private bank.

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