As announced in the United Kingdom’s Spring Budget for 2024, delivered by the Chancellor of the Exchequer on 6^th March, the UK government has published a consultation to seek views on the implementation of the OECD’s flagship transparency standard to help combat criminal activity using crypto-assets to evade taxation - the Crypto-Asset Reporting Framework (the “CARF”). The CARF was previously covered in the article “Update: OECD Crypto-Asset Reporting Framework” published in BrassTax on November 29, 2022 and in the article “UK Spearheads Global Commitment to the Crypto-Asset Reporting Framework” published in BrassTax on December 20, 2023.

The CARF developed from a proposed package of rules put forward by the OECD during 2022 which has since been adopted by the OECD and which 48 countries (including the UK and the United States) have committed to implement into domestic law by 2027. The UK tax authorities have since launched an online voluntary disclosure facility specifically aimed at encouraging taxpayers to disclose any unpaid tax on crypto-assets.

Broadly, the CARF proposes that “reporting Crypto-asset Service Providers” (“RCASPs”) must conduct due diligence and collect details on crypto-asset users and transactions in crypto-assets which should be reported to tax authorities. Tax authorities should then, through the use of tax treaties, exchange the data with the relevant partner jurisdiction where the crypto-asset user is resident. Such data may then be used by tax authorities to identify non-compliance and take necessary action to ensure RCASPs continue to comply with the reporting requirements under the CARF.

The UK’s consultation seeks to obtain views from stakeholders on the precise implementation of the CARF in the UK, whilst also addressing certain optional proposals and amendments to the common reporting standard (“CRS”). Key questions raised in the UK’s consultation relate to areas such as whether: (i) additional guidance would be helpful; (ii) penalties and other enforcement measures are appropriate; (iii) the UK’s proposal to introduce a mandatory registration requirement under the Automatic Exchange of Information service for all “Reporting Financial Institutions” under the CRS is acceptable; and (iv) the time line for implementation is reasonable.

The consultation will run for 12 weeks from 6 March 2024 to 29 May 2024, after which the UK Government will publish a summary of responses and consult on draft regulations prior to the implementation of the new rules.

The consultation demonstrates the UK’s continued commitment to tackling tax evasion within the crypto world. Similar timelines to implement similar measures have also been proposed by the United States (1 January 2025) and the EU (the seventh amendment to DAC 8 – a proposal largely similar to the CARF – is expected to apply from 1 January 2026).