CARF and CRS 2.0: preparing your first cryptoasset tax return

The cryptoasset tax landscape is fast evolving with the introduction of the Crypto-Asset Reporting Framework (CARF) and the updated Common Reporting Standard (CRS 2.0). Both introduced by the Organisation for Economic Co-operation and Development (OECD), they aim to enhance global tax transparency by closing gaps in the automatic exchange of information (AEOI) and extending stricter reporting controls. Backed by the new UK AEOI regulations, in-scope firms that aren’t compliant face stronger financial penalties.

The first filing deadline for both regimes is 31 May 2027, covering the 2026 calendar year. Crypto firms need to ensure the necessary frameworks, data, and reporting processes are in place ahead of the first submission.

A closer look at CARF

The UK's CARF regime came into force on 1 January 2026 and applies to UK Reporting Cryptoasset Service Providers (RCASPs). This covers centralised exchanges, custodial wallet providers, brokers and dealers in cryptoassets and, in some cases, DeFi applications where a controlling entity can be identified. HMRC estimates around 50 firms currently qualify, though this number is expected to grow as the market develops. UK RCASPs are required to register with HMRC by 31 January 2027.

UK RCASPs must collect standardised user data and transaction information and report to HMRC, with the first report due by 31 May 2027, covering the 2026 calendar year. Reports will include crypto users resident in the UK and other reportable jurisdictions.

Greater scrutiny for UK cryptoasset taxpayers

UK-based RCASPs must report CARF data on all UK taxpayers for which they undertake relevant transactions. HMRC will combine this with data from overseas RCASPs, via international exchange. That combination strengthens HMRC's ability to match declared gains and income on self-assessment returns against transaction records. 

As such, firms need to ensure their customer data is accurate and complete. Where relevant they should encourage clients to make use of the voluntary disclosure facility for anyone holding undeclared gains from before April 2024. 

The OECD has also published an XML schema user guide to standardise the technical format for CARF submissions and exchanges. This will establish a consistent approach across jurisdictions and help providers to implement compatible systems ahead of 2027 data exchanges. Firms will need to factor in these schema changes when updating their reporting systems and processes.

Aligning CARF with international initiatives

To date, 48 jurisdictions have implemented CARF-aligned reporting requirements. These include all EU member states implementing through DAC8, alongside Jersey, Guernsey, the Isle of Man, Japan, Brazil, and the Cayman Islands. All, including the UK, will begin sharing CARF data with one another from 2027 to improve transparency and international oversight.

A second cohort, including Australia, Canada, Singapore, Switzerland, Hong Kong, and the UAE, has committed to first exchanges in 2028. Over 75 countries have now made formal CARF commitments, and 53 have signed the CARF Multilateral Competent Authority Agreement.

DAC8 applies to crypto asset service providers regulated and authorised under the markets in crypto-assets regulation (MICA). Cryptoasset operators not regulated by MICA that provide services to EU residents were required to register in one EU member state by 1 January 2026. 

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UK CRS 2.0 – stricter penalties now in force

Alongside CARF, traditional UK financial institutions are facing enhanced obligations under CRS 2.0 and stricter penalties under the International Tax Compliance (Amendment) Regulations 2025. These explicitly brought e-money institutions within the definition of a financial institution for the first time. 

CRS 2.0

Updating the Common Reporting Standard, CRS 2.0 introduced stricter due diligence, requiring self-certification from both account holders and controlling persons, alongside more detailed account-level reporting. The first CRS 2.0 reporting year is calendar year 2026, with the initial report due by 31 May 2027.

UK penalty regime

The UK penalty regime reflects HMRC's move from self-oversight to a proactive audit regime. Process gaps are now easier to identify and carry significant financial costs.

Reporting financial institutions or specified non-reporting financial institutions should have registered with HMRC by 31 December 2025. New entrants to the regime need to register by 31 January following the first calendar year of in-scope status. Firms must still register, even if they have no reportable accounts to file. Failure to register carries a penalty of up to £1,000, plus £300 per day. Additional penalties include:

• Failure to submit a report, or late submission – up to £5,000, plus £600 per day.
• Inaccurate or incomplete reports – up to £300 per account holder.
• Due diligence failures – up to £100 per account holder or controlling person.
• Failure to obtain a valid self-certification – up to £300 per instance, applying under both CRS and FATCA.

These penalties operate alongside a ‘soft landing’ transitional measure. For the first two reportable periods, HMRC has indicated it may not charge penalties where firms can show they took all reasonable steps to comply.

Separate UK CRS and FATCA reporting

HMRC has announced that the current combined CRS and FATCA XML reporting schema will end after 31 December 2026. From 1 January 2027, CRS and FATCA reports must be submitted using separate, updated schemas aligned with OECD and EU standards. 

Firms will need to reconfigure their reporting systems and test the new formats early, to ensure the first submissions aren’t rejected on technical grounds.

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Next steps for CARF and CRS 2.0 compliance

The first CARF and CRS 2.0 filings are due in the UK by 31 May 2027, covering the full 2026 calendar year. Data collection obligations are already live, so firms need to ensure their compliance and reporting frameworks include all new obligations around onboarding processes, self-certification, or systems requirements. Firms that don’t have the necessary frameworks in place will struggle to accurately complete their returns in May. Key considerations include:

• Registration status – firms should assess the compliance criteria for CARF and CRS 2.0, and ensure they have registered with HMRC as needed, noting the financial penalties for late registration.
• System and process readiness – internal systems, processes, and data collection methods need reviewing against the expanded requirements under CRS 2.0 and CARF, and updating where gaps exist.
• Cryptoasset onboarding – businesses with cryptoasset exposure need onboarding processes to align with CARF standards.
• Policy and procedure updates – policies and procedures need revising to reflect the enhanced requirements of CRS 2.0. Delays here carry direct penalty risk.
• Data quality – firms should regularly assess data quality and follow up with customers to address any information gaps and maintain documentation to demonstrate reasonable steps to comply.
• Staff training – training programmes across relevant departments help keep staff current with tax authority guidance and maintain ongoing compliance.

With obligations already live, and penalties accruing daily, resolving any compliance gaps is essential to meet HMRC expectations and prepare for the 31 May deadline.

For more information about CARF and CRS 2.0 contact Martin Killer.