HMRC chases historic crypto-asset tax liabilities

Monday, 04 December 2023
HM Revenue & Customs (HMRC) has launched a campaign to persuade taxpayers to voluntarily disclose any unpaid tax on crypto-asset transactions, possibly going back to the emergence of crypto-assets.
HMRC sign

The taxation of crypto-assets is not straightforward and many types of transactions may have to be declared. HMRC says disclosure is required at least for exchange tokens such as Bitcoin, non-fungible tokens and utility tokens. It has recently sent emails to some taxpayers it believes have entered into crypto-asset transactions but have not paid tax on them.  

The voluntary disclosure requirements are strict. 'You must pay the full amount you owe within 30 days of making your disclosure', says its new guidance. 'If you do not, HMRC will take steps to recover the money. If the deadline is on a weekend or bank holiday, make sure your payment reaches HMRC by the end of the previous working day. If you do not pay by the deadline, you may need to pay a penalty, interest or both.' Taxpayers will need to establish for how many years they need to declare unpaid tax. This will depend on whether they took reasonable care in the past in calculating and reporting their liabilities, or whether they deliberately misled HMRC about their crypto-asset income or gains. In theory, the disclosure could cover up to 20 years, although the first cryptocurrency, Bitcoin, did not exist before 2008.

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.

The Association of Taxation Technicians (ATT) warns that the taxation of crypto-assets is not straightforward and taxpayers should seek advice before disclosing if they are in any doubt as to their tax obligations in respect of these virtual assets, or if they need to report income or capital gains arising to HMRC.

The launch of the new voluntary disclosure facility may be linked to the recent announcement that the UK is joining the CARF international crypto-asset reporting framework, an OECD transparency standard agreed between multiple jurisdictions in March 2023. This will allow the automatic exchange of information on crypto exchanges between financial authorities including the details of taxpayers who use crypto exchanges.

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