The UK, alongside 48 other countries, has signed the Crypto-Asset Reporting Framework (CARF) requiring crypto platforms to start sharing taxpayer information with tax authorities with a view to combatting offshore tax avoidance and evasion.
The data collection and reporting requirements apply to any entities or individuals that, as a business, provide services effectuating exchange transactions in crypto-assets for or on behalf of customers with a relevant connection to the jurisdiction implementing the CARF. Intermediaries and other services providers providing exchange services (ie brokers and certain dealers) may also be caught.
The definition of crypto-assets under CARF is broad, covering any digital representation of value that relies on cryptographically secured distributed ledger or a similar technology to validate and secure transactions. It includes stablecoins, derivatives issued in the form of a crypto-asset and certain non-fungible tokens. There are exceptions, however, for categories of crypto-assets deemed low risk for tax compliance purposes.
The CARF is the latest transparency standard of the Organisation for Economic Co-operation and Development and recognises the increased tax compliance risks associated with crypto-assets. Exchanges of information under the CARF are expected to take effect from 2027.
For further information, please contact:
Kate Steele, Partner, Hill Dickinson
kate.steele@hilldickinson.com
