Spring Statement 2022 announced that the government is investing a further £161 million over the next five years to increase compliance and debt management capacity in HMRC. We are starting to see a move in this direction with HMRC chasing crypto tax.
With an estimated three million owners of cryptocurrency in the UK and the economic fallout of the pandemic to finance, HMRC are tracking down those with tax to pay by forcing crypto exchanges to share their consumer information.
Reminder of UK tax on cryptocurrencies
UK tax can be due when cryptocurrencies are sold at a profit and this includes the scenario where one cryptocurrency is traded for another, crypto is spent on goods or services or gifted to someone else.
Generally, crypto is taxed as capital gains and there is tax to pay if this exceeds £12,300 in a tax year. If you make a large volume of transactions, you might be considered to be trading, which results in income tax instead. Mining, staking, Airdrops, DeFi interest or getting paid in crypto can also trigger an income tax charge.
HMRC crypto chasing
A common misconception is that HMRC will not find out about crypto tax that is due. HMRC have contacted the major crypto exchanges (including Coinbase, CEX and eToro) to obtain customer information and their historic crypto transaction information.
Where information has been received, HMRC have been issuing crypto ‘nudge letters’ asking people to check whether they have any tax due and to tell HMRC about it. You might not have tax to pay, but a response should be made. The letters include a request to sign a certificate declaring that no tax is due, and we strongly suggest specialist advice is taken to check the position before any declaration is made to HMRC.
Please see our article As HMRC cracks down on undisclosed income; help is at hand for more information on HMRC nudge letters.
How can Mercer & Hole help?
We can quickly and efficiently help to confirm whether any crypto tax might be due and advise of the best way to report this to HMRC to bring the matter to a swift close.
To prevent HMRC applying larger penalties, it is always best to check whether any tax is due and with our help, report this to HMRC before they contact you.
Once your affairs are regularised, we can also offer ongoing help with your annual tax return to report the crypto position, together with providing advice on your tax and financial affairs.
If this may impact you or if you have any concerns with regards to crypto tax, please don’t hesitate to contact Henry.