Digital Assets Service Providers in the UK to Report User Data to HMRC by 2027
A recent announcement from His Majesty’s Revenue and Customs (HMRC) has revealed that digital assets service providers in the UK may soon be required to report user data to the tax collection agency. This move is in response to a new regulatory framework that the country is adopting.
Adoption of OECD Crypto Asset Reporting Framework
The HMRC has announced that the UK will be adopting the Organisation for Economic Development (OECD) Crypto Asset Reporting Framework (CARF) and extending it to domestic reporting. This means that companies categorized as reporting crypto asset service providers (RCASPs) based in the UK will be required to collect and report user data.
According to the HMRC, data collection is expected to commence on January 1, 2026, with the first report due in May 2027.
Requirements for Reporting Crypto Entities
Under the new framework, all UK-based RCASPs, including exchanges, dealers, and brokers, will need to collect information about their users and transactions. To be considered based in the UK, a company must meet one of four criteria: be incorporated in the UK, pay taxes in the country, manage its business there, or have a place of business in the UK.
For crypto entities operating in multiple countries where CARF applies, they only need to report in one country where they are tax resident. If they are tax residents in multiple countries, they can choose any of those countries for reporting.
Submission of KYC Information and Transaction Data
As part of the reporting requirements, crypto service providers will need to collect personal data from their users, including name, date of birth, address, and country of residence. They must also obtain national insurance or unique taxpayer references for UK residents and tax identification numbers for non-UK residents. Additionally, information about a controlling person may be required.
Transaction data, such as the value, crypto asset, and type of transaction, must also be collected. This information will enable the regulator to link each taxpayer to their account.
Global Trend of Increased Crypto Transaction Surveillance
The implementation of the CARF framework is not unique to the UK, as over 60 countries, including major economies like the US, Australia, and Canada, have committed to adopting it domestically. The aim is to enhance international cooperation on crypto transactions and combat illicit activities.
While the increased surveillance of crypto transactions is intended to address concerns around illicit use and taxation, it has raised privacy and innovation concerns among experts and stakeholders. The EU, for example, recently proposed anti-money laundering measures that would impact anonymous crypto accounts and privacy coins.
Despite the potential challenges, many view the move towards regulated reporting as a positive step for the crypto industry and the broader financial ecosystem.