ICAEW’s Tax Faculty has responded to the government’s consultation on implementing the CARF in the UK. It has advised that HMRC should learn from existing OECD-led reporting regimes to ensure it avoids past difficulties, and makes things simpler and easier for UK exchanges to comply.     

The CARF was developed by the OECD and is due to be implemented in the UK by 2026 at the earliest. Under the CARF, reporting cryptoasset service providers (RCASPs) will be required to collect details of their users and the transactions carried out on their platform. This information should be reported to the tax authority where the RCASP is resident. It will then be shared with the partner jurisdiction where the user is resident. 

ICAEW’s recommendations

The CARF is based on the common reporting standard (CRS), but different jurisdictions have signed up to CARF compared to CRS. The Faculty has urged the government to ensure that there is not an inadvertent data breach by sharing information with HMRC for a jurisdiction that is out of scope for CARF or CRS.

The Faculty has drawn HMRC’s attention to a number of challenges that RCASPs may face in complying with the regime. It recommends that a wide range of tax identification numbers are allowed to confirm a user’s identity and tax residence status. HMRC should seek to publish details of and guidance on the XML schema RCASPs will use to make reports. Any penalty regime introduced to enforce compliance with the regime should be made as simple and light-touch as possible.

The Faculty supports alignment between CRS and CARF regarding the deadline by which annual reports need to be made by RCASP (31 May following the calendar year to which the report relates).

It also supports extension of the CRS and CRF to domestic reporting, provided this prevents HMRC from gaining alternative investigation powers into the users and transactions being reported on. Domestic reporting means that UK-based platforms and exchanges would need to share details of their UK-based customers with HMRC.