The government has opened a consultation on how the UK should implement the Cryptoasset Reporting Framework in a bid to identify tax non-compliance.
The framework (CARF) is a standard developed by the OECD that addresses tax non-compliance using cryptoassets.
The Spring Budget 2024 report said the government was implementing international standards to close gaps in the tax transparency system, which have emerged from developments in fintech and the global cryptoasset market.
HM Revenue & Customs said the primary purpose of the framework was to provide the tax authority with access to standardised information to help identify and tackle tax non-compliance.
The government has previously defined tax non-compliance as “not getting your tax right the first time, for any reason. It includes evasion, avoidance and other behaviours, such as making careless errors or mistakes on your tax return”.
According to the consultation, the CARF broadly works as follows:
- ‘Reporting Cryptoasset Service Providers’ (RCASPs) must collect details on cryptoasset users and transactions in cryptoassets;
- RCASPs must conduct the required due diligence;
- RCASPs must report the data to tax authorities;
- tax authorities must exchange the data with the partner jurisdiction where the taxpayer is resident;
- the information is available for use by tax authorities to identify tax non-compliance;
- tax authorities must enforce compliance with the framework.
The UK announced its intention to implement the tax transparency standard in November.
The consultation also comes after HMRC launched a campaign last year, which aimed to tackle crypto tax avoidance by encouraging people to come forward and disclose any unpaid tax.
chloe.cheung@ft.com
