Mandatory Disclosure Rules in the UK

Changes are underway to the cross-border rules on tax avoidance and disclosure. The Organisation for Economic Co-operation and Development (OECD) worked with the UK Government to devise the Mandatory Disclosure Rules (MDR). The new rules will come into force on 28th March 2023 and will mean that any new arrangements made after the implementation date should be reported to His Majesty's Revenue and Customs (HMRC).

What is MDR Replacing?

The Mandatory Disclosure Rules, were passed into law in January 2023, after being consulted on for two years, replacing the EU-based DAC-6 rules which were in place prior to the UK leaving the European Union. The UK is attempting to refocus efforts from EU-facing now that the transition period has come to a close, to become more outwardly global facing and this is, in large part, the motivation for changing the laws on this issue.

What is the Purpose of the MDR Changes?

The new rules that are being introduced are designed to clamp down on tax evasion. They are designed to compel the promoters and advisers of those who are looking to evade tax to inform HMRC of any account details relating to people who should be paying tax in the UK.

Arrangements that circumvent the Common Reporting Standard (CRS) will automatically be reportable once the new legislation comes into effect. The Common Reporting Standard is the way that taxation information is routinely shared by different tax reporting authorities and is specifically designed to stop people hiding money offshore. Finding ways that this could be circumvented was previously a way that scrutiny could be avoided and the beneficial owners of accounts could be successfully hidden from the taxation authorities.

The UK will be part of a reciprocal network of jurisdictions that will be sharing the financial and account information and this will be used to build a picture in order to ensure that the people who should rightly be paying tax in the UK and the other jurisdictions taking part are made to do so.

The new tax transparency measures coming into effect will target complex and opaque offshore business structures and attempts to unravel them in a way that allows for the correct amount of taxation to be levied on the ultimate beneficiaries of the money.

What is the Policy Objective of MDR?

The new legislation on MDR aims to encourage taxpayers to move away from hiding money in offshore accounts believing that the rules will prevent it being discovered by the relevant taxation authority. The UK Government believes that the co-operation model that is being implemented will make it far more difficult for people who are relying on this to escape the scrutiny of the taxation authorities in their own country.

HMRC intends to identify and challenge potential cases of offshore tax evasion much more rigorously, based on the information obtained via MDR.

Find Out What This Means for You

If, after reading this article, you feel that you may be caught up in some of the changes that have been outlined above, feel free to contact Lawrence Grant. We are based in Harrow in the UK but provide financial services that transcend physical distances, and we have clients all around the globe who rely on us for their international tax planning strategies.

If you would like to talk to us about your unique circumstances and how we can provide assistance to you or to your company, please don't hesitate to contact us via telephone on +44 (0)20 8861 7575 or via email on We would be happy to help you.

Proudly authored by Alan Rajah, Partner

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