Crypto Asset Reporting Framework
20th Jun 2023
Our partners over at Recap.io have written an article ‘Crypto Asset Reporting Framework: Industry experts share the potential impact of new regulations’ after polling crypto experts, including our Head of Crypto Louise Lane, to find out how they think CARF and new tighter rules on crypto will impact investors across the world.
The Crypto Asset Reporting Framework (CARF) has now been adopted as an international standard to be followed to ensure worldwide global tax transparency of crypto activity. This will be achieved with the mandatory automatic exchange of information regarding crypto ownership, between worldwide tax authorities and Crypto Asset Service Providers (such as crypto exchanges). The idea is that if a UK crypto investor is trading on a crypto exchange in another country, that exchange will be required to send annual reports to HMRC providing aggregated information. Whilst this will not be enough to allow HMRC to work out the tax liability, it will give them a rough idea of who has crypto and the volume of their overall trades.
This is another clear signal towards HMRC clamping down on ensuring UK taxpayers are correctly declaring their crypto income and capital gains. At this time, HMRC remain receptive to voluntary disclosures bringing past crypto tax liabilities up to date, but their attitude is likely to shift in due course. If HMRC instigate an investigation into a taxpayer’s crypto activity (for example after receiving a CARF report), any underdeclared tax will also attract penalties. In contrast, making a voluntary disclosure before HMRC come knocking often results in no penalties. As penalties are a % of the tax underdeclared, they can be a significant extra cost.
We have a large specialised crypto tax and accounting team at Wright Vigar who can help you bring your crypto taxes up to date and remain on top of them.
