UK regulatory authorities have announced that they will require reports of all transactions carried out by users in the country from local crypto platforms, starting in 2026. This decision marks a significant change in the UK’s crypto reporting rules as it implies an expansion of the Cryptoasset Reporting Framework (CARF).
Sources close to the situation noted that with this new regulation in place, His Majesty’s Revenue and Customs (HMRC), the UK’s tax, payments, and customs authority, will acquire automatic access to both local and international crypto information for the first time.
The authorities made clear that they adopted this decision to enhance tax compliance ahead of CARF’s first global information exchange, scheduled to take place in 2027.
The UK adapts new regulations to enhance the reporting process in the crypto ecosystem
The Organisation for Economic Co-operation and Development (OECD) established CARF in June 2022, and the official CARF documentation was released to the public in June 2023. This initiative was launched to develop a system that enables the automatic exchange of crypto transaction information between tax authorities worldwide.
The rules set forth by CARF require crypto service providers to conduct background checks, verify the identities of each user, and submit a report with detailed transaction information annually.
Notably, the OECD initiative was designed to focus primarily on transactions carried out across borders. Hence, sources pointed out that any crypto transactions taking place entirely within the UK will not be classified among these automatic reporting requirements. This information was cited from a policy paper published by HMRC.
Initially, the government intended to halt crypto from being viewed as an “off-CRS” asset class. This motive prompted it to include domestic users in this framework with the hope that it will finally achieve this goal. According to reports, this move indicates that the government aims to ensure that crypto transactions are not overlooked, like traditional financial accounts under the Common Reporting Standard.
Regarding the new crypto reporting regulations, UK officials expressed their belief that this combined approach will streamline the reporting processes for crypto firms, while presenting a more comprehensive set of data to tax authorities, which is useful in identifying noncompliance and evaluating taxpayer responsibilities.
Additionally, the country introduced a new tax plan called “no gain, no loss” earlier this week. Reports noted that this plan will delay capital gains taxes for decentralized finance (DeFi) users until they decide to sell their tokens. When it was made available for feedback, the new tax plan reportedly received positive comments from the local industry.
Governments globally embrace updates in their tax regulations
The UK’s move comes at a time when governments globally are making efforts to update their tax regulations to improve the tracking process of digital asset activities as cryptocurrency becomes more popular in finance.
For instance, reports indicate that South Korea strengthened its tax regulations in October. At this time, the National Tax Service announced that it would seize cryptocurrencies stored in cold wallets and conduct home searches for hardware wallets. This would only apply if they suspect that taxpayers were hiding digital assets to escape tax payments.
Another example is Spain. Recent reports stated that the country’s parliamentary group submitted a proposal aimed at raising the top tax rate on crypto profits to 47%, according to information from a local news outlet. With this adjustment in place, crypto earnings would be classified under the general income tax bracket, and corporate investors would face a flat 30% tax rate.
On the other hand, Switzerland announced on Thursday, November 27, that it has postponed the start of automatic information sharing on cryptocurrencies with foreign tax authorities until 2027, while deciding which countries it will share data with.
Meanwhile, it is worth noting that CARF rules will still be incorporated into Swiss law on January 1. However, their implementation has been postponed, as transitional measures are being prepared to assist local crypto companies in complying.
In the US, Representative Warren Davidson submitted a bill in November that would allow Americans to pay their federal taxes with Bitcoin, transferring the payment into a national BTC reserve.
The proposed plan, known as the Bitcoin for America Act, would exempt such payments from capital gains taxes by treating the transferred Bitcoin as neither a gain nor a loss for the taxpayer.
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Source: https://www.cryptopolitan.com/uk-crypto-platforms-to-log-all-transactions/