Understanding the UK's Crypto Asset Reporting Framework (CARF): A New Tax Reporting Regime

2025-Q4
Written By Bob_O

image by Jon Tyson

The UK is implementing a new tax reporting regime specifically for digital assets, known as the Crypto Asset Reporting Framework (CARF). This framework isn’t about new taxes, but about how existing tax rules apply to digital assets and ensuring HMRC (Her Majesty’s Revenue and Customs) has the information it needs to enforce those rules. It's a significant development that impacts both individuals and businesses dealing with digital assets.

What is CARF?

CARF is the UK’s implementation of the global standards set by the Financial Action Task Force (FATF) – an international body combating money laundering and terrorist financing. The aim is to improve the transparency of digital assets asset transactions and ensure that taxes are paid on any profits made. It's essentially about closing the information gap HMRC previously had regarding digital assets activity.

Who Does CARF Affect?

CARF introduces reporting obligations for two main types of entities:

  • Cryptoasset Exchange Providers (CAEPs): These are businesses that facilitate the exchange of digital assets for fiat currency (like GBP) or other digital assets. This includes digital asset exchanges, brokers, and certain peer-to-peer platforms.

  • Cryptoasset Intermediary Providers (CAIPs): These are businesses that provide services related to digital assets, such as custody, wallet provision, or portfolio management.
    These providers will be legally required to collect and report information about their customers’ digital asset transactions to HMRC.

What Information Will be Reported?

CAEPs and CAIPs will need to report a range of information, including:

  • Customer Identification: Details about the individuals or entities transacting in digital assets.

  • Transaction Details: Information about each transaction, including the date, time, amount, and the digital assets involved.

  • Counterparty Details: Information about the other party involved in the transaction (where available).

  • Wallet Addresses: The wallet addresses used in the transactions.

What Does This Mean for Individuals?

While you as an individual don’t directly report to HMRC under CARF (that responsibility falls on the exchanges and intermediaries), CARF will significantly impact your tax obligations. Here's how:

  • HMRC will have more data: HMRC will have access to a much more complete picture of your digital asset transactions, making it easier to identify discrepancies or under reported gains.

  • Increased Scrutiny: Expect increased scrutiny of digital asset related tax returns.

  • Importance of Accurate Records: You must keep your own detailed records of all your digital asset transactions. This will ensure your tax returns are accurate.

  • Potential for Amended Returns: If HMRC identifies discrepancies, you may be required to amend your previous tax returns.

Timeline:

The reporting requirements under CARF are being phased in. The first reporting period is expected to cover transactions from April 2024, with the first reports due to HMRC in January 2025.

Feeling overwhelmed by the new regulations? We can help you get your digital asset records in order. Contact us today for a free consultation.

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Disclaimer: We cannot provide financial or legal advice. This blog post is for informational purposes only. You should consult with a qualified financial advisor and/or tax professional for personalized advice regarding your specific circumstances.

 

Resources:

  • HMRC Guidance on CARF: https://www.gov.uk/government/publications/cryptoasset-reporting-framework

  • FATF Guidance on Crypto Assets: https://www.fatf-force.org/publications/vulnerabilities/crypto-assets

Bob_O