The UK government has published a summary of responses to its recent public consultation on implementing the OECD’s Cryptoasset Reporting Framework (CARF) and the updated Common Reporting Standard (CRS), as reported by STEP.
The CARF framework would mandate that virtual asset service providers (VASPs) report user and transaction details to tax authorities to address tax non-compliance within the crypto sector.
The government’s consultation explored the rules’ scope, implementation, and potential penalties for non-compliance. The outcome document indicates that the CARF is expected to take effect from 1st January 2026. Under this timeline, VASPs subject to the rules would begin collecting information on that date, with the first reports due by 31st May 2027.
Most respondents supported extending the CARF, although some raised concerns and called for additional guidance. Key areas for clarification included: identifying when individuals or entities hold ‘control or sufficient influence’ within decentralised services; defining relevant crypto-assets; clarifying transaction type definitions; and addressing data protection and security measures.
On the scope of reporting, respondents suggested that reporting each transaction on an asset-by-asset basis could generate overly granular data that might exceed what tax authorities need. They proposed instead that reporting be structured around broader categories of crypto-assets and token types.
HMRC reported that most respondents viewed the proposed penalty regime as “balanced and reasonable.” However, some called for a “grace period” or phased penalty approach in the initial CARF years, suggesting that HMRC could begin with warning notices and phase in penalties after two years.
HMRC has consulted on proposed CRS amendments and their alignment with the CARF. These changes would expand CRS coverage, introduce mandatory registration for reporting financial institutions, and update the penalties regime, aligning it with the digital platforms model rules. Respondents from HMRC’s CRS Working Group, which includes STEP, noted the complexities in aligning CRS and CARF requirements, especially when an asset falls under both frameworks. They cautioned that excessive complexity could hinder effective data management and increase non-compliance risks.
The government has now opened a new consultation on draft amendments based on previous input. This consultation covers mandatory registration requirements, reforms to non-compliance penalties, and adjustments to the appeals process. The consultation will remain open until 10th January 2025.
