Richard Smith

Partner & Solicitor

DATE PUBLISHED: 04 Jan 2024 LAST UPDATED: 24 Jan 2024

Cryptocurrency: HMRC on high alert for outstanding Tax

In the digitalised world crypto assets such as: Bitcoin, Ethereum and NFTs are increasingly being used for investments, transactions, and various other means.

As of Tuesday 12th December 2023, Forbes Digital Assets stated that the global cryptocurrency market cap is at “$1.65 Trillion.” With this in mind, His Majesty’s Revenue & Customs (HMRC) are cracking down on taxpayers by asking them to disclose any unpaid tax on cryptocurrency transactions by choice. Questions may go back to the dawn of crypto assets.

The taxation of cryptocurrency is not straightforward. HMRC have disclosed new guidance in relation to the taxation of crypto assets stating:  

“You must pay the full amount you owe within 30 days of making your disclosure. If you do not, HMRC will take steps to recover the money.”

Furthermore, “If the deadline is on a weekend or bank holiday, make sure your payment reaches HMRC by the end of the previous working day.” However, “If you do not pay by the deadline, you may need to pay a penalty, interest or both.” The new voluntary disclosure requirements are strict.

How is this going to impact you?

Taxpayers will need to demonstrate for how many years they need to declare any unpaid tax. This may be difficult if the taxpayer has failed to calculate or report their crypto assets and liabilities, or whether they deliberately misled HMRC about their crypto asset income or gains.

HMRC have provided guidance stating that taxpayers must keep separate records for each transaction including:

The type of tokens, the date you disposed of them, the number of tokens disposed of the number of tokens you have left, the value of the tokens in pound sterling, bank statements and wallet addresses, and a record of the pooled costs before and after you disposed of them.

The Society of Trust and Estate Practitioners have stated that:

“Transactions giving rise to capital gains relating to the 2022/23 or 2023/24 tax years need not be reported under the new system; however, they can be declared either on self-assessment returns for those tax years, or through HMRC's real-time capital gains tax portal. However, amounts relating to earlier years – going back three years – should be reported using the new facility.”

What is next?

On 10 November 2023 His Majesty’s Treasury announced that it intends to implement OECD’s Crypto-Asset Reporting Framework (CARF) by 2027, which provides for the automatic exchange if tax-relevant information across international borders. This is to curb tax evasion on crypto assets.

What should you do?

The taxation of crypto assets is complicated, and taxpayers should seek advice prior to filing a tax return if they are uncertain about their tax obligations in the context of income or capital gains tax.

If you are unsure or need help with crypto asset related queries, please visit our crypto specialist webpage. You can contact us on 01202 525 333 or email Richard.smith@ellisjones.co.uk. Alternatively, you can also email our specialist Cryptocurrency team by emailing cryptocurrency@ellisjones.co.uk.

How can we help?

When you submit this form an email will be sent to the relevant department who will contact you within 48 hours. If you require urgent advice please call 01202 525333.

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