New AML reporting duty postponed

Implementation of a controversial measure requiring solicitors to report cross-border transactions to the authorities has been delayed by six months, HM Revenue and Customs has confirmed. This follows the passing by the EU of an amendment allowing member states to defer the DAC 6 reporting regime because of the pandemic. 

DAC 6 imposes on intermediaries such as lawyers a duty to report cross-border deals bearing the hallmarks of aggressive tax planning. Solicitors have raised concerns that compliance could put them in breach of legal professional privilege. The first reporting deadline, for transactions dating from June 2018, was originally set for July.

However the Law Society last week advised members that HMRC has confirmed that the UK is taking up the optional six-month deferral and that the government will amend the International Tax Enforcement (Disclosable Arrangements) Regulations 2020, which implement DAC 6, accordingly. While the new regulations may not be in force by 1 July, HMRC has confirmed that no action will be taken for non-reporting during the period between 1 July and the date the amended regulations come into force.

HMRC is expected to publish wider DAC 6 guidance shortly.

The Law Society noted that the amending directive also provides for the possibility of the EU agreeing to one further extension for a maximum three more months. However, it noted that ‘this is a delay and not a cancellation of reporting requirements and the optional nature of the new proposal could still lead to mismatches and complexity, so law firms may be well-advised to continue their work preparing for DAC 6 compliance’.