Press Room

14 Nov 2022

The new kid on the (OECD) block – Dion Seymour


Crypto Tax & Accounting Technical Director, Dion Seymour, explains that in light of the Crypto-Asset Reporting Framework, the world of cryptoassets is becoming smaller and more visible, and hiding wealth is increasingly difficult, in Accountancy Daily.

Dion’s article was published in Accountancy Daily, 14 November 2022, and can be found here.

On 10 October, the OCED announced that the technical text of the Crypto-Asset Reporting Framework (CARF) would be delivered to the G20[1]. It is important to understand what the framework is and what it will do.

Broadly, CARF requires certain crypto stakeholders to collect information on certain taxpayers and report this to their local tax office. Readers may assume CARF will broadly follow CRS (Common Reporting Standard) and, as they are both tax transparency agreements, this is understandable. However, it is simply not the case that CARF and CRS are the same, as CRS was never intended to cover the novel nature of cryptoassets such as Bitcoin. Therefore, with the help of participating jurisdictions, the OECD went back to the drawing board to develop the framework that we see now from the ground up.

Currently, there are ongoing negotiations between governments regarding how many jurisdictions will adopt CARF and to what extent. This article is based on the technical text that has been made public and the writer’s understanding, having previously led HMRC’s response on the development of CARF.  The reporting requirements may change as the negotiations on implementation continue.

How will CARF work?

CARF will be an Automatic Exchange of Information (AEOI) agreement, meaning that there is no need for tax administrations to evidence risk or wrongdoing to gather and use this information.  Unlike CRS, the information will not be a year-end snapshot, but rather an aggregate of the transactions over the calendar year.  This will require Reporting Crypto Asset Service Providers (RCASPs) to record their customers’ transactions in a way that they are unlikely to be doing now. This may be a challenge, and depending on the timetable for implementation, which is still to be announced, may require significant IT projects in addition to the costs for providing this information.

The main reporting requirements of CARF will be for transactions where there are:

  • Exchanges between Relevant Crypto-Assets and fiat currencies;
  • Exchanges between one or more forms of Relevant Crypto-Assets; and
  • Transfers (including Reportable Retail Payment Transactions) of Relevant Crypto-Assets.

However, CARF is a comprehensive framework, and its impact goes further than these points. It is not in the gift of this article to delve into all complexities of CARF, but some of the wider headline points are:

  • RCASPs will have to provide details in what capacity cryptoassets have been received, for example through a loan, airdrop or a hard fork (where they have such knowledge);
  • Non-Fungible Tokens (NFTs) used for payment or investment purposes will be in scope. However, where the tokens are used in a “closed-loop” system, these will not be in scope;
  • Where RCASPs have processed payments on behalf of a merchant, these will also need to be reported. However, this is only for high-value transactions (not your morning coffee);
  • Carveouts have been created for Central Bank Digital Currencies and certain stablecoins where these will be reported in CRS.

There is often a view that cryptoasset investors have not fully declared their gains, and this may be true. Just as CRS increased HMRC’s visibility of offshore bank accounts, CARF will undoubtedly do the same for cryptoassets.

Considerations for accountants

Accountants need to have an understanding of cryptoassets, and obtaining sector experience is a full-time job. Recent HMRC market research estimates that 10% of the UK adult population own or have owned cryptoassets,[2] indicating that cryptoassets are becoming increasingly mainstream. Supporting HMRC’s findings, recent research from Chainalysis found that the UK has the highest rate of cryptoasset ‘adoption’ in Western, Northern and Central Europe[3].

Worryingly, HMRC’s research found that just over a quarter of those individuals that stated they owned cryptoassets had seen HMRC’s guidance and one in four hadn’t seen any tax guidance. This means that individuals may have fallen into some common misconceptions such as: crypto-to-crypto is not taxable (it is), a tax charge only occurs when money is taken out of the exchange (also incorrect) and using cryptoassets to purchase goods and services isn’t taxable (this is a disposal).

What does this mean for accountants? The combination of lack of tax understanding and increased ownership in the UK makes it more likely that your clients may have some exposure to cryptoassets or you may have clients that will have historic positions that need to be corrected.

Potential pitfalls

There are some clear risks for accountants and advisors to consider:

  1. You may have clients that do not think that their cryptoasset portfolio is relevant and they might not have brought it up.
  2. The gap in education has been seen as a risk by HMRC that tax has not been declared. HMRC has conducted educational activity, which have focused on the above misconceptions. Those advising must ensure that they do not follow the same misconceptions.
  3. As CARF enters an operational stage, we can expect to see more activity from HMRC. This may be more nudge campaigns or targeted activity (HMRC has noted in a Freedom of Information request that they have other data[4]), which will result in more individuals requiring assistance to bring their tax affairs up to date.

In all cases, reviewing and bringing your client’s affairs up to date will be challenging and the best approach is to resolve any issues now.

The world of cryptoassets is becoming ever more visible. If your client asks “will HMRC know about my crypto” perhaps the answer is “maybe not today and maybe not tomorrow, but soon, and for the rest of your life[5].”

[1] https://www.oecd.org/newsroom/oecd-presents-new-transparency-framework-for-crypto-assets-to-g20.htm

[2] https://www.gov.uk/government/publications/individuals-holding-cryptoassets-uptake-and-understanding

[3] https://blog.chainalysis.com/reports/2022-global-crypto-adoption-index/

[4] https://www.ft.com/content/9334a914-24c2-4651-9ced-d59408556c44

[5] GDPR requirements dependent of course!


Dion Seymour

Dion is a Director with extensive experience in all aspects of the taxation of crypto assets. He was formerly the crypto asset policy and product owner at HMRC.

Email: Dion Seymour