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December 15, 2021

UK issues consultation on regulations to implement OECD mandatory disclosure rules

Executive summary

On 30 November 2021, as part of tax administration and maintenance day, the United Kingdom (UK) Government issued a technical consultation along with draft regulations to implement new UK mandatory disclosure rules (MDR). These rules will be based on the Organisation for Economic Co-operation and Development (OECD) model disclosure rules for Common Reporting Standard avoidance arrangements and opaque offshore structures which were published in March 2018. MDR requires advisers (and sometimes taxpayers) to report information to the tax authorities on certain prescribed arrangements and structures, including those that could circumvent the Common Reporting Standard tax transparency rules. This information could be exchanged between Her Majesty’s Revenue & Customs (HMRC) and other relevant tax authorities. The consultation closes on 8 February 2022 and the new rules are expected to enter into force in summer 2022.

Detailed discussion


These new regulations will replace similar European Union (EU) rules, known as DAC 6, introduced previously as The International Tax Enforcement (Disclosable Arrangements) Regulations 2020 (SI 2020/25). At the end of the transition period following Brexit, the Government amended the regulations to ensure the rules remained operative from 1 January 2021, and to align them more closely with the OECD’s model rules. Those amendments were made in the International Tax Enforcement (Disclosable Arrangements) (Amendment) (No. 2) (EU Exit) Regulations 2020 (SI 2020/1649). The Government is now consulting on draft regulations to implement the OECD MDR regime in the UK, which will replace the current rules.

The draft regulations and guidance

  • The draft regulations require promoters, service providers and taxpayers to send information to HMRC about reportable arrangements and structures. The draft regulations draw closely on the OECD model rules and associated Commentary to provide consistency in the application of the rules between jurisdictions. This is intended to reduce the reporting burden faced by businesses operating across multiple jurisdictions which has been a key theme of discussions with businesses since the model rules were first published.

  • HMRC considers that the OECD Commentary to the model rules is a helpful source of interpretation, and in general it is anticipated that there will be broad alignment between the Commentary and the interpretation set out in HMRC’s new MDR guidanceHMRC intends to publish guidance on MDR once the regulations are finalized and before the rules come into effect. HMRC envisages that generally the guidance will be consistent with existing guidance currently in the International Exchange of Information Manual (IEIM) section 600000 onwards, except where changes are necessary to ensure alignment with the model rules and Commentary, or to address any gaps in the existing guidance. Given the similarities between the MDR and DAC 6, HMRC proposes to take a similar approach to interpretation of MDR as it took for DAC 6 and is seeking comments on areas where HMRC could further refine or explain its interpretation.

  • Points to note include: Intermediaries are defined by reference to the OECD model rule which identifies two types of intermediaries: ”promoters,” who design or market a “CRS avoidance arrangement” or an “opaque offshore structure” and “service providers” defined as any person or persons providing “relevant services” in respect of such an arrangement or structure, provided that they could reasonably be expected to know that the arrangement or structure was indeed a CRS avoidance arrangement or an opaque offshore structure. The current DAC 6 guidance identifies two types of intermediaries: any person who “designs, markets, organises, makes available for implementation or manages the implementation of a reportable cross-border arrangement” and any person who “knows or could reasonably be expected to know that they have undertaken to provide, directly or by means of other persons, aid, assistance or advice, with respect to designing, marketing, organising, making available for implementation or managing the implementation of a reportable cross-border arrangement.” In practice, HMRC considers that the definitions in the two sets of rules are largely equivalent, and it considers it will be unlikely that a person would have a reporting obligation under one set of rules but would not have had one under the other.

  • “Reportable Taxpayers” are defined as any “actual or potential user” of a CRS avoidance arrangement or “a natural person whose identity as a beneficial owner cannot be accurately determined due to the opaque offshore structure.” The UK draft regulations take a similar approach to the approach taken when implementing DAC 6; however SI 2020/25 refers to relevant taxpayers rather than reportable taxpayers. HMRC considers there to be no material difference in the definition of relevant taxpayer and reportable taxpayer as, in its view, anyone who is an “actual or potential user” of an arrangement would, in practice, likely also be within scope as someone to whom the arrangement was made available for implementation or who had implemented the first step of the arrangement.

  • In relation to “opaque structures,” the definitions in the model rules cover much of the same ground as the current UK hallmark D2 in SI 2020/25. Non-exhaustive examples of both CRS Avoidance arrangements and opaque offshore structures are included in the OECD Commentary to the model rules.

  • The reporting rules in SI 2020/25, as amended, only apply to arrangements which “concern” the UK and any other jurisdiction, or which concern two or more EU member states, or an EU member state and any other jurisdiction. The draft regulations, in line with the approach in the model rules, do not include any such territorial limitations and therefore arrangements and structures will be reportable regardless of which jurisdictions they involved, as long as the intermediary or taxpayer has a reporting obligation in the UK, which, in turn, will derive from the intermediary or taxpayer having a UK nexus. UK nexus is defined in the draft rules as being resident in the UK, having the place of management in the UK, being UK incorporated or having a UK permanent establishment (PE) which has been an intermediary for a particular arrangement or structure. This lack of territorial restriction at the level of the arrangement or structure may create an additional burden in certain instances.

  • In relation to who has reporting obligations, SI 2020/25 contains an additional test for having a link to the UK; namely registration with a professional association in the UK, which the model rules and the draft UK regulations do not include. This may mean that some persons who would otherwise have been intermediaries under SI 2020/25 will not have to report under the draft regulations.

  • These new rules extend the retrospective period for reporting for CRS avoidance arrangements (but not opaque offshore structures) to 29 October 2014, and this requirement will extend to promoter intermediaries only and not to service provider intermediaries or reportable taxpayers.

  • The time limit for reporting for intermediaries will be 30 days after the arrangement or structure is made available for implementation, or 30 days after the intermediary provides assistance or advice in relation to the design or implementation of the arrangement or structure. For taxpayers who have to report, the time limit for reporting is 30 days after the first step in the arrangement or structure has been implemented. HMRC has provided guidance at IEIM651000, et seq., in connection with the SI 2020/25 regulations on when an arrangement is “made available” and when the first step has been implemented, and considers that the same interpretation will apply to the draft regulations. The draft regulations, unlike SI 2020/25, do not include as a reporting trigger when the arrangement is “ready for implementation.” There may be occasions where an arrangement is ”ready” but not yet “made available”: for example, if the design of the arrangement is final and it could be implemented, but the intermediary decides to delay marketing it to potential clients. In these circumstances, HMRC recognizes that a report may be due later under the draft regulations than it would have been under SI 2020/25.

  • The draft rules provide for exemption from reporting where an intermediary has legal professional privilege or where information has already been provided to HMRC or to a tax authority in a so-called partner jurisdiction. A partner jurisdiction is one which has similar rules in place and which has the necessary exchange of information agreements in place to enable the information to be shared with HMRC. A jurisdiction which has not signed the Multilateral Competent Authority Agreement on CRS Avoidance Arrangements and Opaque Offshore Structures will not be a partner jurisdiction. Based on this definition, including the reference to similar rules, it is not entirely clear which jurisdictions will be partner jurisdictions and HMRC is proposing to issue a list of such jurisdictions to aid compliance.

  • Penalties will apply for failure to comply with the rules, including failure to notify by an intermediary having legal professional privilege and failure to provide information to HMRC when requested.

  • Reporting under the new rules is likely to be online via either xml or manual entry and HMRC will issue a schema in due course.

Proposed commencement and transition

The Government envisages that when the new MDR regulations come into force, SI 2020/25 (as amended) will be revoked. This means that arrangements or structures which would otherwise be reportable under both SI 2020/25 and the MDR regulations will only be reportable under one set of regulations. While SI 2020/25 will be revoked, those regulations will still have effect in relation to arrangements entered into before the new MDR regulations come into force. Therefore, an arrangement entered into immediately prior to these regulations coming into force will not fall between the two regimes; it will still be reportable under the rules in SI 2020/25.


For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United Kingdom), London

Ernst & Young LLP (United States), UK Tax Desk, New York

Ernst & Young LLP (United States), FSO Tax Desk, New York

Ernst & Young LLP (United States), Transaction Tax Desk, New York


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