How CCO Reasonable Prevention Procedures Can Help You Mitigate DAC6 Penalties

McDermott Will & Emery

McDermott Will & Emery

Corporate criminal offences (CCOs) under Part 3 Criminal Finances Act 2017 (CFA) are increasingly coming under the spotlight of the UK tax authorities. In a 10 February 2020 press release published in response to a Freedom of Information Act request, HM Revenue and Customs (HMRC) confirmed that it is currently reviewing 30 potential CCO cases involving large and small businesses across a wide range of industry sectors. Of these, nine are live investigations. This announcement, along with the UK Government’s plans to create a new Anti-Tax Evasion Unit within HMRC, suggests that HMRC is likely to continue stepping up its investigations for CCOs and related tax evasion offences for the foreseeable future. Thus, the need to have a “ reasonable prevention procedures” defence in place for your organisation has become all the more important. Further information on the CCOs and “reasonable prevention procedures” can be found in our Special Report.


Relevance of DAC6 in the context of the CCOs

Many practitioners are of the view that HMRC’s recent announcement on further CCO investigations going forward will mean that DAC6 compliance is more likely to be actively monitored, even though non-compliance with DAC6 obligations is not a criminal offence under UK law, unlike non-compliance with the CFA. The purpose of this note is to explain how having a CFA “reasonable prevention procedures” defense in place may serve as a “best practices” guidepost for how taxpayers concerned about DAC6 can mitigate DAC6 civil penalties by establishing the right internal procedures.

DAC6 non-compliance by itself will not necessarily increase the likelihood of a CCO investigation. For example, if an affected taxpayer or its intermediary failed to report an RCBA to HMRC and HMRC was not otherwise able to obtain information about that RCBA from other EU tax authorities through the automatic information exchange procedure, it would have no basis for commencing a CCO investigation. That said, it is possible that HMRC could identify risk triggers for DAC6 non-compliance (as well as CFA-related offences) in the normal course of an audit or enquiry into an organization’s UK tax affairs. Thus, as a practical matter, we recommend that you address DAC6 risks at the same time as CCO risks and related prevention procedures, and we can help you do this.

All businesses with UK operations need to address CCO compliance matters. However, businesses that act as intermediaries under DAC6 (typically, corporate services providers, family offices, investment banks, trust companies, accountancy firms and fund managers) should be particularly mindful of DAC6 risks in addition to CCO risks, since they will have the primary obligation to disclose reportable cross-border arrangements (RCBAs) to HMRC. As such, addressing DAC6 risks in tandem with CCO risks would make a lot of practical sense for such intermediaries. This approach also makes sense for any business with UK operations that engages in cross-border transactions involving at least one EU member state, where no external intermediary has been involved in advising on or implementing the transaction in question. Law firms are also capable of acting as intermediaries, although any legal advice on the implementation of an RCBA would likely be protected by legal professional privilege. This article therefore focuses primarily on issues of relevance to intermediaries that are not protected by legal professional privilege.

Our recent article “Top 10 Things You Need to Know About DAC6” explains the DAC6 reporting obligations for intermediaries and affected taxpayers, including who must report to HMRC, what to report to HMRC, and when to report it. Intermediaries and affected taxpayers may find their obligations and the reporting process confusing due to the regulations’ complexity and the current lack of clarity surrounding the rules relating to RCBAs, particularly where the hallmarks are concerned. It is hoped that the United Kingdom’s DAC6 reporting obligations will become clearer by the time HMRC publishes further technical guidance on DAC6 (expected shortly before the UK implementing regulations come into force on July 1 2020), but there is a chance that intermediaries and affected taxpayers could still inadvertently fail to report their RCBAs.

Organisations should therefore consider implementing a backup plan to mitigate any DAC6 penalties in case they find themselves in this situation. Such a backup plan means having “reasonable prevention procedures” in place to address DAC6 risks as well as CCO risks, even though their primary purpose is to act as a defence to the CCOs. The procedures are similar to anti-bribery and corruption policies, except that they are aimed at preventing tax evasion facilitation offences instead of bribery offences.

What are the DAC6 penalties in the United Kingdom?

Under the new regulations, a person (typically an intermediary, but also an affected taxpayer if no intermediary is available to do the reporting) who fails to file a return of reportable information with HMRC is liable to a civil penalty of up to £5,000. This one-off penalty is relatively low compared to the DAC6 penalties in EU Member States; however, further civil penalties can accrue daily if HMRC considers a one-off penalty to be inappropriately low. In these circumstances, HMRC may apply to the First Tier Tribunal (FTT) for determination of a daily accrued penalty at a rate of £600 per day. The FTT will take into account all relevant considerations in determining a daily accrued penalty, but in general, penalties for failing to report RCBAs implemented between June 25 2018 and July 1 2020 will accrue from September 1 2020 to the earlier of (i) the date on which the penalty is determined and (ii) the date the return is filed late. Penalties for failing to report RCBAs implemented after 1 July 2020 will accrue from the day following the end of the 30-day reporting period to the earlier of those same two dates. The penalty must not exceed £1 million in any event.

If the failure to report continues beyond the initial penalty determination date, HMRC may impose further civil penalties of up to £600 for each day of continued failure, even if the accrued total exceeds the £1 million cap determined by the FTT. HMRC has indicated that daily default penalties will only be imposed for serious failings, including where the behaviour leading to the failure was deliberate. If the behaviour is not deliberate or there are no other exacerbating factors such as repeated failures, the penalty will be a one-off, with the possibility of a reduction for mitigating factors.

Affected taxpayers must also file an annual return for the tax year or accounting period in which the RCBA is made available for implementation, and again for subsequent tax years or accounting periods in which their participation in the RCBA gives them a tax advantage. Should they fail to file an annual return, they will be liable to a penalty of £5,000 per RCBA to which the current failure relates, if there have been no previous failures. This increases to £7,500 per RCBA for a single previous failure in the previous 36 months, and to £10,000 per RCBA for two or more previous failures in the previous 36 months.

How can DAC6 penalties be mitigated or prevented?

Under the new regulations, no penalty will arise if the intermediary or relevant taxpayer satisfies HMRC (or, as appropriate, the FTT) that there is a “reasonable excuse” for failing to comply with any of the regulations. It is hoped that HMRC’s yet-to-be-published guidance will contain examples of what constitutes a reasonable excuse. In the meantime, the United Kingdom’s existing Disclosure of Tax Avoidance Schemes (DOTAS) regime may shed some light on HMRC’s likely approach to the question of whether a reasonable excuse exists. According to HMRC’s DOTAS guidance, HMRC will consider a person to have a reasonable excuse if the failure to report is due to an unusual event that is either unforeseeable or beyond the person’s control (such as serious illness), and which is an insurmountable obstacle to timely compliance.

HMRC has also indicated that no penalties will arise for failing to comply with the regulations if that failure occurred due to a lack of clarity over the regulations’ application, where such lack of clarity occurred as a result of legislation or guidance having not yet been finalised, or where the interpretation of the regulations could not reasonably have been surmised from DAC6 itself or from previous draft legislation or guidance. HMRC has indicated that its yet-to-be-published guidance will provide more detail on how the penalty regime will operate in such circumstances.

Penalties may be mitigated in “special circumstances”, according to HMRC. There is currently no guidance on the meaning of “special circumstances”, but the rules state that such circumstances do not include the inability to pay, or the fact that a potential loss of revenue from one taxpayer is balanced by a potential overpayment by another. It is hoped that HMRC’s yet-to-be-published guidance will offer clarity, ideally with examples of what will and will not count as “special circumstances” for these purposes.

How should the “reasonable prevention procedures” under the CCO regime specifically address DAC6 issues?

HMRC has indicated that it will use the RCBA information reported “to better identify and challenge offshore non-compliance as part of the Government’s strategy to bear down on tax avoidance and tax evasion”. Although tax avoidance and tax evasion are not the same thing, it does seems to suggest that HMRC may use the CCO review process as an opportunity to identify instances of DAC6 non-compliance. For this reason, it has been suggested that HMRC might consider mitigating DAC6 penalties if an intermediary or relevant taxpayer can show that its organisation has “reasonable prevention procedures” in place to identify specific risks associated with DAC6, and how the organisation proposes to address them.

We therefore recommend that you include DAC6 risks as part of your wider CFA risk assessment, even though the CCOs and DAC6 regimes target different activities and non-compliance with the latter does not constitute a criminal offence. Should you decide to do this, you should consider applying the CFA principles and guidelines to DAC6 risks in the same way as you would for CCO risks (for further details, see our Special Report). For example, this could be achieved by risk-assessing your organisation’s activities as a whole and evaluating the extent to which they consist of cross-border arrangements involving at least one EU Member State (EU-connected cross-border activities), rather than the activities of your organisation’s employees or agents (since DAC6, unlike the CFA, does not have an “associated persons” concept).

Once you have identified your organisation’s EU-connected cross-border activities, you would then need to evaluate whether any of the hallmarks apply. For this purpose, a DAC6 decision tree or flow chart may be appropriate if, for example, your organisation regularly participates in cross-border activities of a similar nature and on a large scale. On the other hand, if your organisation participates in cross-border activities only occasionally and on a smaller scale, it may be more appropriate to seek bespoke advice on DAC6’s applicability to particular transactions on a case-by-case basis. Organisations that regularly participate in a wide range of different types of cross-border arrangements with an EU component may feel that a combination of both would be a sensible course of action.

Should you decide to include DAC6 risks when drafting your “reasonable prevention procedures” for CCO purposes, you might include, for example, a statement to the effect that your organisation uses a DAC6 decision tree and/or seeks bespoke advice on a case-by-case basis to help identify whether a cross-border arrangement is reportable. Such procedures might also include statements to the effect that staff are being trained appropriately to identify DAC6 risks, with internal reporting systems in place to enable the heads of tax or legal or other equivalent senior personnel to have the final say over whether a cross-border arrangement should be reported to HMRC, and to then direct compliance teams to act accordingly.

The McDermott Difference

CFA and DAC6 compliance matters are likely to come under increased scrutiny from HMRC. To discuss any or all of the following, please contact your regular McDermott lawyer or the contacts listed for this article:

  • Guidance on how to conduct CFA and DAC6 risk assessments
  • Drafting or reviewing reasonable prevention procedures with DAC6 risks in mind as well as CCO risks
  • Preparing a DAC6 decision tree or flow chart to suit your organisation

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© McDermott Will & Emery | Attorney Advertising

Written by:

McDermott Will & Emery

McDermott Will & Emery on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.