Brexit & Tax Controversy: UK withdraws from European instruments for resolution of tax disputes

Prepared by Carlo Romano, Diane Hay and Maura Parsons

On 1st December 2020, HMRC (i.e. UK Tax Authority) announced that the UK will withdraw from the European Dispute Resolution Directive no. 2017/1852 (DRD) and from the European Arbitration Convention no. 90/436/EEC (AC) and at the end of the transition period, i.e. on 31 December 2020.

Consequences of the UK withdrawal from Dispute Resolution Directive and Arbitration Convention

After 31 December 2020, the UK will not consider any new requests for mutual agreement procedure (MAP) access to the DRD (applicable to controversies relating to fiscal year 2018 onwards) or the AC (on transfer pricing matters and attribution of income to permanent establishments) submitted to the UK, or to any EU Member State where the UK is a party to the dispute. The UK will continue to bring existing cases to a conclusion where the requests were received on or before this date.

From 1 January 2021, requests for arbitration in new cases will only be available where the existing bilateral treaty has an arbitration provision – usually based on Article 25(5) of the OECD Model. With respect to Italy-UK tax disputes, there is not such a provision in the currently applicable tax treaty and instead may itself come into force through the OECD Multilateral Instrument, which has not been ratified by Italy yet. Nonetheless, according to the existing draft position of the Italian Government, and in pursuance of the ratification instrument handed over by the UK Government, the mandatory arbitration clause is likely to be implemented, superseding the existing treaty, for prospective cases following the entry into force of the amended treaty. With respect to retrospective cases, Article 36 of the MLI might require an additional agreement between Italian and UK competent authorities.

Therefore, cases that went into MAP before the provision came into force between the two States might be accepted into arbitration only if they agree that it will apply to that specific case.


In light of the above, each Italy-UK tax dispute should be analyzed based on the relevant circumstances: all the MAP requests that already involve, or are going to involve, the UK, need to be carefully considered to understand whether (a) arbitration is available and (b) there is a timing matter that needs to be considered from a strategic perspective (for instance, by filing protective claims).

Let’s Talk

For a deeper discussion, please contact:

Carlo Romano

PwC TLS Avvocati e Commercialisti


Diane Hay



Maura Parsons