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UK implementation of the Mandatory Disclosure Rules

  • United Kingdom
  • Tax planning and consultancy


On 24 November 2022, HMRC published the outcome of its consultation on the design of draft regulations (the MDR Regulations) to implement the Model Mandatory Disclosure Rules for Common Reporting Standard (CRS) Avoidance Arrangements and Opaque Offshore Structures (Model MDR), which were published by the Organisation for Economic Co-operation and Development (OECD) in 2018.

In this briefing, we summarise the status of the implementation of the Model MDR in the UK, as well as the key outcomes from HMRC’s recently concluded consultation.

Background – DAC 6

The OECD published the Model MDR in March 2018. In parallel, the EU developed similar rules which were introduced in Council Directive (EU) 2018/822 (DAC 6), which came into force in June 2018.

The UK implemented DAC 6 through the International Tax Enforcement (Disclosable Arrangements) Regulations 2020 (the UK DAC 6 Regulations), which were made in January 2020 and came into force in July 2020. However, the International Tax Enforcement (Disclosable Arrangements) (Amendment) (No 2) (EU Exit) Regulations 2020 significantly reduced the scope of the UK DAC 6 regulations from the end of the Brexit transition period.

Under the amended UK DAC 6 Regulations, since 1 January 2021 cross-border arrangements have been reportable by relevant intermediaries and taxpayers only if they meet one of the hallmarks under category D of DAC 6 (broadly, arrangements which have the effect of undermining reporting obligations concerning the automatic exchange of information, or which involve a non-transparent legal or beneficial ownership chain).

UK implementation of MDR

At Budget 2021, the UK government announced that it would implement the OECD’s Model MDR. In November 2021, HMRC launched a consultation on the design of the MDR Regulations, which it published in draft form, at which point the government envisaged the MDR Regulations would come into force in summer 2022.

The government has now indicated the MDR Regulations will come into force in the first half of 2023 (the precise date is still to be determined), at which point the UK DAC 6 Regulations, as amended, will be repealed.

Any reportable arrangements that are made available by intermediaries or implemented by taxpayers after the implementation date for the MDR Regulations will need to be reported within 30 days. Any relevant pre-existing arrangements going back to 25 June 2018 (see below for further discussion of this lookback period) will need to be reported within 180 days after the MDR Regulations are implemented.

HMRC has said that its guidance for DAC 6 will continue to apply, as the guidance covers similar areas to those in the Model MDR, and HMRC considers that the Model MDR do not expand the scope of reporting. HMRC’s consultation outcome document states: “It remains a key point that if the beneficial ownership is not obscured from the tax authorities, then this should generally not be caught. If beneficial ownership is obscured for any reason, then this arrangement should be reportable”.

Consultation outcome

HMRC has stated that two areas of particular stakeholder interest emerged from the consultation meetings and written responses: (i) the period for reporting of pre-existing arrangements entered into since 29 October 2014 (which was the lookback period included in the published draft MDR Regulations); and (ii) the availability of an online reporting system.

Nearly all the respondents to the consultation were opposed to the requirement for promoters to report pre-existing arrangements that dated from 29 October 2014 onwards. Stakeholders were concerned that the amount of work required to review tens of thousands of files involved would be disproportionate to the potential benefit for HMRC in terms of reporting arrangements (particularly given that many businesses did not expect to uncover many, if any, reportable arrangements). Stakeholders also pointed out that many businesses only keep records for six years and therefore could only check information from 2016, and that the large turnover of staff during the lookback period would create further obstacles in reviewing the historic arrangements. In addition, businesses considered that an MDR lookback period longer than that included in DAC 6 (which required reporting of pre-existing arrangements from 25 June 2018) would be inconsistent with previous government policy.

In response to these concerns, and having considered the balance between burdens on business and the likely compliance benefits to HMRC and the taxpayer, the government decided that reporting pre-existing arrangements should only be required from 25 June 2018.

HMRC require reporting under the MDR Regulations to be done online, using an Extensible Markup Language (XML) file format, which is the commonly agreed method for international automatic exchanges of information including the CRS. The majority of the respondents to HMRC’s consultation stated that the government should provide alternative facilities for intermediaries and taxpayers to report through manual data entry online, noting that, because so few reports would be submitted by businesses it was not cost effective to build IT systems themselves or buy the necessary software package to generate the XML files.

However, the government has decided not to provide a manual system. Instead, HMRC has suggested that third party software providers may be able to provide a solution to businesses which are unable to build systems themselves. HMRC has also said it will discuss with businesses how HMRC can support them with the XML reporting method (although it is unclear how this will play out in practice, given the short timeframe involved).

HMRC has said it will continue to work with stakeholders, including those who responded to the consultation, to draft further HMRC guidance, in order to assist intermediaries and taxpayers to meet their obligations under the MDR Regulations.


The government’s refusal to allow intermediaries and taxpayers to report under the MDR Regulations using online manual data entry will be disappointing to many stakeholders, due to the increased compliance burden this represents. However, the government’s decision to reduce the MDR lookback period to match the DAC 6 lookback period is a welcome development, which brings the UK’s implementation of the Model MDR more closely in line with the UK’s current version of the DAC 6 rules, which the MDR Regulations will replace.

If you would like to discuss how your business will be affected by the UK’s implementation of the Model MDR, please do not hesitate to get in touch with any of the Eversheds Sutherland contacts listed below.