Budget 2024: Tougher Tax rules for Crypto buyers
Budget 2024: Tougher Tax rules for Crypto buyers
Investors in cryptocurrency will face more scrutiny as the government has confirmed the introduction of the Crypto-Asset Reporting Framework (CARF) to share trading data.
Under the CARF rules, cryptocurrency service providers will have to provide details on their users including their transactions and their held assets, and will be reporting the data to HMRC, and if they are located outside of the UK to their relevant tax authority.
This means that tax authorities will be able share relevant data between jurisdictions depending on where the individual crypto investor is a resident for tax purposes.
The new regime will go live in 18 months with the first UK reporting required from 31 May 2027, and then international sharing of data between international tax authorities starting later in 2027. The draft regulations were published in the Budget following consultation earlier this year.
The government has also announced important new international co-operation initiatives to combat overseas tax evasion and close the estimated £40 billion tax gap and has advised that they expect more high-profile enforcement activity by HMRC, including criminal investigations and prosecutions aimed at individuals and their companies.
Previously, cryptocurrency assets could be transferred without any central administrator having any knowledge of the transactions, which has caused ‘significant challenges to tax transparency frameworks.’
The new framework means that transactions can be tracked for tax purposes, with several reporting requirements. Firstly, the full name of the relevant crypto asset must be declared, then the purchases and the sales of any cryptocurrency against the currency used to purchases or the currency gained in the transaction.
Purchases of crypto assets using an alternative crypto asset must be recorded, as well as retail transactions as some platforms are supplying crypto currency cards, which can be used to make purchases online.
It is believed that HMRC will have additional resources, which will be allocated to tackle serious offshore non-compliance, including fraud by wealthy customers and intermediaries.
The UK adoption of the OECD CARF framework was first announced by former Chancellor Jeremy Hunt at the Spring Budget in March 2024.