HM Revenue & Customs (HMRC) is urging Britons to come forward and disclose any unpaid tax on cryptocurrency assets, like exchange tokens, NFTs and utility tokens.
While crypto users have been able to use other HMRC disclosure facilities to declare unpaid tax in the past, this is the first time HMRC has launched a specific disclosure process for those owning crypto assets.
HMRC will soon start automatically receiving information about individuals’ trading activities from crypto platforms.
Pay up! HMRC is urging people to come forward and disclose any unpaid tax on cryptocurrency assets
It follows the UK’s recent announcement that it intends to implement the Organisation for Economic Co-operation and Development Crypto Asset Reporting Framework by 2027.
The framework provides for the automatic exchange of tax-relevant information across borders.
HMRC’s latest intervention underlines concern that many crypto asset owners may be unaware of their obligations and have failed to properly disclose taxable gains, according to tax consultancy BDO.
In some circumstances, several years of unpaid tax may be payable and, depending on the reason for non disclossure, HMRC can have up to 20 years to assess additional tax payable.
If additional tax is due, HMRC will charge late payment interest on that tax. It can also impose tax-geared penalties of up to 100 per cent of the tax, or more if the holding was based offshore.
Dawn Register, head of tax dispute resolution at BDO, said: ‘The launch of this new disclosure facility highlights HMRC’s concern about non-compliance among crypto asset owners and underlines its determination to recover unpaid tax.
‘As ownership of crypto assets tends to be concentrated among young adults, much of this non-compliance may stem from people simply not knowing or understanding their tax obligations when it comes to crypto. This facility could therefore be a very useful opportunity to rectify past mistakes.
‘Individuals will need to get reports from their financial advisers or online platforms to understand their tax position. In certain circumstances, those affected would do well to seek specialist advice on the most appropriate disclosure facility to use.’
In July 2022, research from HMRC found that one in 10 UK adults held crypto assets.
Ownership was more prevalent among men than women, and more concentrated among younger age brackets. Most owners had holdings of less than £5,000, HMRC said.
However, 58 per cent of UK crypto asset holders did not know the tax implications of trading in crypto.
Rules around crypto assets and tax can be complex. But, as a general rule, HMRC treats crypto like other financial assets, meaning capital gains tax may apply.
A gain is typically the difference between what you paid for an asset and what you sold it for.
