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COVID-19: Updated guidance on DAC6 and reasonable excuse

18 May: In line with its updated guidance on appealing penalties, HMRC has amended its commentary on DAC6 to clarify how 'reasonable excuse’ will apply in relation to the coronavirus pandemic.

Earlier this month HMRC expanded its guidance on appealing penalties to specifically consider coronavirus as a ‘reasonable excuse’. 

As a result, HMRC has also updated information on DAC6 detailing how reasonable excuse will apply to obligations under the International Tax Enforcement (Disclosable Arrangements) Regulations 2020. 

The guidance (IEIM800000), confirms: “Because of the COVID-9 situation HMRC accepts that any taxpayer or intermediary who makes a report late because of these difficulties will have a reasonable excuse (and so will not be liable to any penalties for that delay) provided the report is made without unreasonable delay after those difficulties are resolved.”

HMRC acknowledges in its guidance the challenges “in developing and introducing the necessary IT systems, processes and procedures, training staff and identifying reportable arrangements for periods back to June 2018” . 

However, ICAEW’s Tax Faculty reminds taxpayers and agents that it is still important that affected intermediaries retain information and documentation to evidence the reasons behind any failures, and to demonstrate that any omissions were corrected as soon as it was practical to do so. 

Board minutes and more informal records of the general activities of management could all offer support, according to the Tax Faculty. Providing details of the commercial challenges which interrupted the ability to implement the rules will be fundamental to any case. 

The existing guidance references the deadline of 1 July 2020, with the first reports being sent no later than 31 August 2020. However, the European Commission has published proposals deferring certain deadlines for filing and sharing of information under DAC6 by three months. 

The Tax Faculty understands that HMRC will confirm how these proposals will affect the UK rules as and when they are final. It is therefore worth highlighting that the deadline currently referred to in HMRC’s guidance could change.