The EU’s Mandatory Disclosure Rules will take effect on 25 June 2018, following political agreement in March and final approval on 25 May. The Directive must be transposed into national law by 31 December 2019, to take effect from 1 July 2020. The ‘gotcha’ built into the Directive, though, is that arrangements from 25 June 2018 must be disclosed to national tax authorities in August 2020. Cue a certain amount of concern amongst the adviser and taxpayer communities, which suddenly find themselves potentially liable to collect data based on rather unclear rules, before they have sight of local law. The UK is expected to introduce an enabling provision into Finance Act 2019 – and then introduce the rules as regulations – with a draft only available in 2019.
The UK introduced disclosure rules in 2004, when the emphasis was very much on making sure that tax authorities understood what planning was being undertaken. Today, though, most taxpayers will not enter into arrangements requiring early disclosure.
The EU’s Directive seems to be mainly about information. Several of the hallmarks cover arrangements where the tax implications look straightforward. For example, a transfer of more than half the business of a company from one state to another needs to be disclosed. Similarly, the transfer of a ‘hard to value’ intangible asset must be notified.
The Directive starts by presuming that an adviser or facilitator will be the prime discloser of information. However, there’s an exemption for advice covered by legal privilege, as defined in each Member State. Initial comment suggests that German French, Italian and Spanish advisers expect to qualify for exemption. This will leave the burden on taxpayers, as well as on UK advisers. Quite how taxpayers – corporate and individual – will feel about making disclosures remains to be seen. UK advisers find their customers prefer the adviser to manage the process.