HMRC is to issue ‘nudge’ letters to UK crypto asset owners – these are sent as reminders to review tax liabilities and to pay any monies that are owing
This relates to both income and capital gains tax on any income they have received from their crypto asset holdings. It is understood that HMRC suspects that there is an increasing amount of wealth that has been attained because of the rise of cryptocurrencies.
A spokesperson for HMRC said the aim is to ensure people are paying the right tax and to provide additional guidance: “Our letter asks crypto asset holders to review their transactions to ensure that they are declared correctly. We have published detailed guidance to help our customers apply tax law to crypto assets correctly.
“The Cryptoassets Manual explains the tax consequences of different types of transactions involving crypto assets and this can be found on the government website.”
Is tax payable on crypto currencies?
Tax is payable on any profit received from the disposal of cryptocurrencies, including when they are sold, exchanged for another crypto asset, or when they are used to buy goods or services.
HMRC has been able to gain data on who has invested in crypto assets through data requests to UK-based cryptocurrency exchanges.
Many retail investors in cryptocurrencies may also believe – incorrectly – that HMRC is unable to find out about their crypto investments and any gains they may have made. However, it has been able to track down details as was the case with offshore bank accounts.
With crypto holdings, all that matters is the owner of the asset is a UK resident for them to be liable to pay tax. The nudge letters can be produced in their thousands and will be sent out to anyone that has bought and sold crypto, regardless of whether their reporting was correct or if they have also already paid the right amount of tax.