HMRC has the taxation of crypto assets firmly in its sights warns Ed Tahsin, Director at Hillier Hopkins.
HMRC has started contacting various crypto exchanges with a view to obtaining user data and information on transactions. Further exchanges of global information to HMRC may also fall within the Common Reporting Standard. The move echoes the approach adopted by the Internal Revenue Service (IRS) in the US after it began writing to American taxpayers who may not have properly reported their cyptoasset activities.
HMRC will use this information to determine whether taxable activity is subject to UK tax and correctly reported. This will, potentially include capital gains tax on gains, income tax, and corporation tax on profits, mining fees and other earnings. The circumstances will need to be carefully reviewed on a case-by-case basis.
However, it is likely that HMRC will have only partial information it needs to accurately check tax implications and will request further information from individuals and companies as part of its investigations. These requests should not be ignored.
We would recommend that individual and companies involved in crypto asset transactions retain the following information:
- A description of the type of crypto asset involved;
- Date of transaction;
- Detail on the transaction, including value and number of units purchased or sold;
- Totals of investments held;
- Bank statements; and
- Wallet addresses.
Investors and companies that appear not to have accounted for tax in the right way for previous tax years are encouraged to make what is called a voluntary disclosure to HMRC to obtain the best possible settlement agreement whilst minimising interest and penalties. However, professional advice is recommended.
For information on how crypto assets taxation and HMRC investigations please get in contact with one of our friendly experts on +44(0)330 024 3200 and they will be happy to help.