Companies who trade across borders will face a new tax reporting obligation from October, when an EU directive comes into force governing those who are involved in cross-border tax arrangements.
Affecting the UK and any other country overseas, the directive, known as DAC6, will cover the UK and Ireland, the British Virgin Islands and the Isle of Man; it applies to companies in EU member states but affects their tax arrangements with any other country globally. One of the key tests of whether this applies to a particular company is whether the tax arrangement gives that company a tax advantage, but there are several such ‘hallmarks’ which mean that such an arrangement is reportable under the new directive. The new directive is unlikely to be affected by Brexit at the end of this year.
Sarah Woodall has drawn together some questions and answers and a flow chart to help companies and advisers to comply with the new rules; she said: “HMRC have been asked to consider delaying the implementation of this directive, and indications are that this will happen – EU member states have already agreed, though that has yet to be ratified by the European Parliament. Companies now have time to prepare for compliance, and it is certainly worth the effort, since the penalties are significant.”