Mutual assistance recovery directive
The Government will legislate to bring the 2010 EU mutual assistance recovery directive (MARD) into UK law. The main objective of MARD is to help the individual member states of the EU recover taxes by administrative cooperation across the EU.
Who will be affected?
This measure will be relevant to all UK taxpayers and supports the trend towards international cooperation between tax administrations. The new MARD replaces the existing directive which had been in place since 1976, and which has been part of UK law since 2004. The new directive was adopted at EU Council level in March 2010 on the basis that it would become part of the domestic law of the individual member states by 1 January 2012. The measures will support tax authorities in:
- Gathering information across the EU; and
- Collecting tax debts with the assistance of other EU countries.
The new directive enables tax authorities to make information requests across the EU with the assistance of other tax authorities and makes clear that the requested authority cannot decline to do so solely because this information is held by a bank. The measures are therefore directed at improving exchange of information and counteracting bank secrecy. Notably, the new MARD allows for foreign tax officials to be present in another EU country during either administrative enquiries or court proceedings and, if permitted by the requested state, to conduct interviews and examine records.
Until now there has been some cross border tax recovery of tax debts within the EU but this has been limited in scope. Under the new directive, a debtor may be pursued in another EU state, with the assistance of that state's tax authority being requested in enforcement if the requesting state is able to show that the debtor has recoverable assets in the other state. Under the new MARD, costs can be recovered by the requested tax authority related to the related recovery from the debtor. This is designed to encourage tax authorities to devote resources to assisting their EU colleagues.
The directive will be enacted in Finance Bill 2011. The directive becomes fully applicable on 1 January 2012 and the UK legislation transposing the directive and setting out the detailed rules will come into force on that date.
This measure, which had already been announced, fulfils the UK's EU obligations. It supports reciprocal arrangements for recovering and enforcing tax debts, and for international exchange of information. It will strengthen HMRC's armoury of powers, and increase the incidence of requests being served in the UK by HMRC on behalf of foreign tax authorities. The prospect of joint audits being conducted simultaneously by EU tax authorities is also strengthened by this measure.