CARF guide for accountants: what it means for you and your clients

Crypto in four terms

If crypto is new to you, four terms cover most of what follows.

• Blockchain. A public, permanent ledger of every transaction. Anyone can view it and nobody can edit it.
• Centralised exchange. A company, such as Coinbase or Kraken, that holds crypto for its customers and knows who they are. These are the platforms that report under CARF.
• Self-custody wallet. Software or a device where the owner holds their crypto directly, with no company in between. Not in scope of CARF.
• Decentralised exchange (DEX). Software that lets people swap one token for another straight from their wallet, with no company operating it. Not in scope of CARF.

Most clients use more than one of these, and move tokens freely between them.

What the Crypto-Asset Reporting Framework (CARF) is

Approved in 2022 by the Organisation for Economic Co-operation and Development (OECD), CARF sets common rules for how crypto transactions are reported to tax authorities. Exchanges, brokers and other Reporting Crypto-Asset Service Providers must collect each customer's identity and tax residence, and report their activity annually.

It covers crypto-to-fiat and crypto-to-crypto exchanges, plus transfers of crypto-assets. Authorities exchange the data automatically with the customer's country of tax residence. The UK also applies it domestically, so HMRC receives data on UK residents from UK platforms.

The UK and the EU (under its eighth Directive on Administrative Cooperation, DAC8) began collecting data on 1 January 2026. UK platforms submit their first report to HMRC by 31 May 2027. Self-custody wallets, and software developers or decentralised finance (DeFi) protocols with no control over customer transactions, are out of scope.

Why this matters to you and your clients

About 8% of UK adults, roughly 4.5 million people, now hold crypto, double the share in 2021. But HMRC's own research found only 42% of crypto owners knew that spending crypto on goods and services can create a tax bill.

How HMRC taxes crypto

HMRC treats cryptoassets as property, not currency. Existing Capital Gains Tax and Income Tax rules apply.

Capital Gains Tax applies on every disposal, including:

• Selling crypto for pounds
• Swapping one token for another
• Spending crypto on goods or services
• Gifting crypto, except to a spouse or civil partner

Income Tax applies on crypto received as:

• Staking rewards and mining
• Airdrops received in return for a service
• Payment from an employer

A swap between tokens is a disposal even though no pounds change hands, and so is spending crypto on goods or services. The annual exempt amount is £3,000, and the 2024/25 Self Assessment return added dedicated cryptoasset boxes.

HMRC is already looking at crypto

HMRC has nearly tripled the number of crypto nudge letters it sends in two years. These letters are not investigations, but they show HMRC is already using exchange data from UK platforms and bank records.

Tax year	Crypto nudge letters sent by HMRC
2023/24	27,714
2024/25	64,982
2025/26	81,172

From 2027, CARF adds reports from UK and overseas platforms as a standard annual feed. Coming forward first costs less. Depending on behaviour, careless errors disclosed unprompted attract a penalty of 0-30% of the tax, rising to 15-30% once HMRC has made contact, and up to 100% where the error is deliberate and concealed. Clients have duties too. A client who doesn't give a platform their details, or gives inaccurate ones, faces a penalty of up to £300.

Why CARF will cause additional headaches

Whilst the data that will be collected under CARF will be accurate in terms of the transactions that each taxpayer has done with that organisation, it will not reflect an accurate tax picture.

A real-world example from the USA

The US introduced its own broker reporting form, Form 1099-DA, filed with the Internal Revenue Service (IRS), a year ahead of CARF. Summ analysed 30,000 of its US users for the 2025 tax year and found that 1099-DA gaps overstate crypto gains by 944%. Incomplete cost basis tracking across platforms leaves the average investor with $14,500 in gains they never made.

30,000 US users, 2025 tax year	Gains
What 1099-DA forms would report	$481M
Actual capital gains	$46M
Inflated gains	$435M

"These forms only capture part of the picture; typically just the sale. Without the purchase history from other platforms, the IRS sees proceeds with zero cost basis, which looks like pure profit on paper."

Shane Brunette, founder and CEO, Summ

The gap opens because cost basis doesn't travel between platforms. The average user connects four data sources to reconcile their activity, and only one of those is a reporting platform that issues 1099-DAs. That leaves three sources per typical user that won't generate a form, and 57% of all transactions occurred outside reporting platforms.

The burden falls on the taxpayer. First comes reconstruction: manually piecing together transaction history from multiple platforms, wallets and protocols, some of which may no longer exist or maintain records. Then substantiation: providing documentation to the IRS explaining why calculated gains differ from what appears on the 1099-DA forms.

The $435M measured covers one transaction pattern. Extrapolated across an estimated 46 million US crypto investors, Summ estimates the collective impact could exceed $600B in overstated gains. The study excluded wallet-to-wallet transfers, NFT transactions, cross-chain bridges and swaps, and crypto earned as income, each creating further cost basis gaps.

"Your actual tax liability likely bears no resemblance to what those forms suggest. The only way to report accurately is to aggregate your complete transaction history across every platform you've used."

Shane Brunette, founder and CEO, Summ

Two regimes, one problem

The five differences that matter between the OECD's Crypto-Asset Reporting Framework and IRS Form 1099-DA.

	Form 1099-DA	CARF
What it is	A US tax form, furnished to the taxpayer and filed with the IRS under §6045.	An OECD reporting standard, in UK law from 1 January 2026 (DAC8 in the EU). No form goes to the taxpayer.
Reach	Domestic. US brokers reporting US persons to the IRS.	Cross-border between 70-plus jurisdictions. The UK also applies it to UK residents on UK platforms.
Cost basis	Gross proceeds first; basis reporting phases in for assets acquired from 2026, and only what the broker can see.	Not reported at all. CARF captures transaction values, not acquisition cost.
Who reports	Custodial brokers. The DeFi front-end rules were repealed in April 2025.	Reporting Crypto-Asset Service Providers under nexus rules, a wider net including some intermediaries and ATMs.
Timing	Live now. First forms landed in early 2026 covering 2025 sales.	Collection from 1 January 2026. First UK report to HMRC by 31 May 2027.

The lesson for the UK

The 1099-DA at least phases in cost basis for some assets. CARF reports none, so the gap between what HMRC sees and the real gain could be wider. HMRC will see the total value of a client's sales, swaps and transfers on a reporting platform, broken down by cryptoasset and transaction type, and linked to their name and tax reference. It won't see what the client paid for the tokens, activity in self-custody wallets and on DEXs, or anything bought before 2026.

In this illustrative example, a client moves Ether (ETH) to their own wallet before selling it.

What happens	Amount
Client buys ETH in 2023 and moves it to a self-custody wallet	£40,000
Client sells it on a UK exchange in 2026	£42,000
Real gain	£2,000
CARF report shows	£42,000 disposal, with no acquisition cost attached

What to do now

2026 activity is already being collected, so records gathered now avoid reconstruction work in 2027.

1. Ask every client about crypto. Add the question to onboarding and the annual tax questionnaire. Many clients won't mention it unprompted.
2. Update engagement letters. Make clear whether crypto is in scope and what records the client must provide.
3. Collect complete records now. Every exchange and wallet, from 1 January 2026 at the latest, plus the earlier purchase history behind anything sold from 2026. CARF data for 2026 is already being gathered.
4. Calculate cost basis across all sources. Apply the same-day, 30-day and section 104 rules to the client's full history, not one platform's report.
5. Review earlier years. Where gains went unreported, an unprompted disclosure through HMRC's digital disclosure service keeps penalties lowest.

How Summ helps

Summ connects every exchange and wallet a client uses, reconciles cost basis and produces reports ready for HMRC. The accountant portal is free, and you pay per client.

Set up a free accountant account or book 30 minutes with David for a walkthrough.

Sources

• Financial Conduct Authority (FCA), cryptoassets consumer research, 2021-2025 (UK ownership).
• HMRC, Individuals holding cryptoassets: uptake and understanding, research by Kantar, July 2022 (42% figure).
• HMRC crypto nudge letter data, via Freedom of Information requests by UHY Hacker Young.
• HMRC penalty guidance.
• Summ analysis of 30,000 of its US users, 2025 tax year, reported in CPA Practice Advisor, 5 March 2026.