International Tax Enforcement: disclosable cross-border arrangements
Published 13 January 2020
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Who is likely to be affected
These regulations will affect ‘intermediaries’ who design, promote or implement certain types of cross-border arrangements which could be used to avoid or evade tax, as well as those who provide advice or assistance in relation to such arrangements. This could include tax advisers, accountants, lawyers and wealth managers amongst others. It will also affect taxpayers who implement such arrangements.
General description of the measure
The regulations will require taxpayers and their advisers to report details of certain types of cross-border arrangement to HMRC. An arrangement will be reportable if it contains certain characteristics, known as hallmarks. Being reportable will not mean that an arrangement is used for tax non-compliance. However, these hallmarks are characteristics which are commonly seen in arrangements that could be used to avoid or evade tax.
Policy objective
The regulations will support the government’s work to bear down on tax avoidance and tax evasion. Mandatory reporting of these types of arrangements to HMRC will discourage people from entering into aggressive tax arrangements in the first place, and will provide HMRC with early information to identify and challenge arrangements where appropriate, ensuring everyone pays their fair share of tax.
The regulations implement EU Directive 2018/822 (on Administrative Cooperation in the field of taxation). While the UK is an EU Member State, and during any Implementation Period, the UK is required to implement this Directive. All other EU Member States are also required to implement this Directive, and tax authorities will share the information they receive under the Directive to identify and challenge tax non-compliance across international borders.
Background to the measure
A power was included in Finance Act 2019 to allow the government to make these regulations. Following informal conversations with industry, draft Regulations were published for consultation on 22 July 2019. The consultation closed on 11 October 2019, and the government published a summary of responses to the consultation on 13 January 2020.
Detailed proposal
Operative date
The regulations are due to come into force on 1 July 2020. They will apply to arrangements that are made available for implementation or ready for implementation on or after that date. However, reports will also have to be made in respect of arrangements where the first step of the arrangement is implemented on or after 25 June 2018.
Current law
Section 84 of Finance Act 2019 contains the power for the government to introduce this measure by regulations.
Proposed revisions
New regulations will be introduced, which set out a requirement for ‘intermediaries’ and taxpayers to report details of certain types of cross-border arrangement to HMRC. There is a 30 day window in which the report must be made. The regulations include penalties for non-compliance with the regime.
Summary of impacts
Exchequer impact (£m)
| 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 |
The Office for Budget Responsibility will include the impact of this measure in its forecast at the next fiscal event.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
This measure is expected to impact relatively few individuals. Individuals will only be required to report details of cross-border arrangements to HMRC where no intermediary is involved who has to report. In addition individual taxpayers who enter into reportable arrangements will have to report this information to HMRC.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that there will be impacts for groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a significant impact on businesses. HMRC is engaging with affected businesses and information gained through this process will contribute to further quantifying these costs. A fuller assessment of costs in relation to businesses will be made once the regulations have come into force. This measure is not expected to impact on civil society organisations.
Operational impact (£m) (HMRC or other)
There will be delivery costs for HMRC to implement this measure. IT costs are still being finalised, but initial estimates are £7.7m.
There will also be resource costs to HMRC estimated to be around £3.5m per year.
Other impacts
There is not expected to be any impact on climate and fuel poverty targets or air quality targets.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, please contact Sarah Weston on telephone: 03000 589165 or email: mandatorydisclosure.rules@hmrc.gov.uk