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Who is likely to be affected

Reporting cryptoasset service providers and the users of their services.

General description of the measure

The Cryptoasset Reporting Framework (CARF) provides visibility on the transactions of users of cryptoassets. The CARF requires UK reporting cryptoasset service providers (RCASPs) to collect information in relation to in scope transactions, on an annual basis. The regulations provide for mandatory registration of reporting cryptoasset providers and contain specific penalties for non-compliance. The information collected includes the activities and tax residency of their users. This information will be sent to HMRC whereafter information on non-UK users will be exchanged with jurisdictions who have also implemented the CARF. The data collected and received from other jurisdictions will be used to tackle tax evasion, avoidance and help customers to meet their tax obligations.

Policy objective

Cryptoassets are a rapidly expanding and developing area in relation to which tax authorities have historically had limited means to gather data. The new reporting requirements will make it more difficult for taxpayers to avoid reporting under the Common Reporting Standard (CRS), which allows tax authorities to exchange information about financial accounts, by moving their money into cryptoassets. This has the potential to undermine the successes of measures such as the Common Reporting Standard, which allow tax authorities to exchange information on financial accounts. The CARF will maintain the progress already made in helping taxpayers to meet their tax obligations and will assist in ensuring a level playing field internationally. It will also increase tax transparency and help to tackle tax avoidance and tax evasion. Amendments to the CRS are also being made.

Background to the measure

Following international consultation in 2021, on 8 June 2023 the Organisation for Economic Co-operation and Development (OECD) issued a publication entitled ‘International Standards for Automatic Exchange of Information in Tax Matters: Crypto-Asset Reporting Framework and 2023 update to the Common Reporting Standard’ on 8 June 2023. The UK was involved throughout the discussions and agreement of these model rules at the OECD. The UK proposes to implement the CARF through secondary legislation. A consultation was undertaken in May 2024, with the measure gaining broad approval.

Detailed proposal

Operative date

The measure comes into effect on 1 January 2026.

Current law

The CARF is a new measure which does not replace or amend existing legislation.

Proposed revisions

The instrument is made under the powers in section 136 of the Finance Act 2002 and section 349(2) of the Finance (No.2) Act 2023 The OECD developed the CARF and CRS amendments as a complementary package.

Summary of impacts

Exchequer impact (£million)

2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030
—	—	+40m	+110m	+85m	+80m

These figures are set out in Table 5.2 of Autumn Budget 2024 and have been certified by the Office for Budget Responsibility. More details can be found in the policy document alongside Spring Budget 2024.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

This measure is not expected to have an impact on the majority of individuals as it mainly affects reporting cryptoasset service providers. Reporting cryptoasset service providers can be individuals if they are running a business of being a cryptoasset service provider. The impacts on businesses are provided below and it would apply to these individuals running a service provider business as well. Individuals could also be subject to a penalty if they provide false self-certifications to their cryptoasset service providers. This is fraudulent or negligent behaviour so it would only be imposed on individuals who undertake such behaviour and would only affect a small minority of individuals. The CARF provides a wider deterrent effect on individuals who hold cryptoassets which will encourage correct tax reporting of the income and gains on their assets.

The measure is not expected to impact on family formation, stability, or breakdown.

This measure is expected overall to have no impact on individual’s experience with dealing with HMRC as the change does not impact on the vast majority of individuals.

Data on reportable users of RCASPs in scope will be collected and provided to HMRC. This data will be exchanged with other tax authorities annually. The information will be used to identify and risk assess individuals and help them meet their tax obligations. For UK GDPR compliance, a Data Protection Impact Assessment (DPIA) has been completed. We have consulted with HMRC’s Office for Data Protection office and the Information Commissioners Office (ICO) on this legislation as required by the UK GDPR Article 36 (4) consultation process. Once the service goes live an entry for the CARF will be added to HMRC’s Record of Processing Activity (ROPA).

Equalities impacts

It is not anticipated that there will be impacts for groups sharing protected characteristics.

Impact on business including civil society organisations

Estimated one-off impact on administrative burden

One-off impact	£ million
Costs	negligible
Savings	nil

Estimated continuing impact on administrative burden

Continuing annual impact	£ million
Costs	0.8
Savings	nil
Net impact on annual administrative burden	+0.8

This measure is likely to have a significant impact on the approximately 50 RCASPs currently in scope. RCASPs can include both entities and individuals effectuating exchange transactions as a business.

One-off costs include new IT infrastructure, purchasing or updating new software. Familiarisation costs are expected, training and hiring staff to deal with new data collation and processing. Ongoing costs will include onboarding customers in line with Anti Money Laundering (AML) requirements and annual packaging and submission to HMRC of reportable data collected and annual IT licensing costs.

Operational impact (£million) (HMRC or other)

The implementation of the CARF policy as a whole is currently estimated to cost £69 million to HMRC for IT delivery and support costs, exchange and compliance.

Other impacts

Other impacts have been considered and none has been identified.

Monitoring and evaluation

The measure will be monitored through information collected through the information exchange arrangements, competent authority discussions, tax returns and compliance work undertaken by HMRC.

Further advice

If you have any questions about this change, contact John Sandeman on Telephone: 03000 589486 or email: eoi.policy@hmrc.gov.uk.

Declaration

James Murray MP, Exchequer Secretary to the Treasury, has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.