HMRC investigate ‘cryptocurrencies’ or ‘cryptoassets’, as HMRC prefers to call them!

Lindsay is hearing from so many people these days who have come under HMRC scrutiny for their involvement in cryptocurrencies.

So, whilst Lindsay does not profess to be an expert in this subject, she has successfully settled enquiry cases and sees more and more coming through her door as HMRC get to grips with taxing the gains and profits made.
So, what is HMRC’s view of these new assets.
They have their own internal manual called the Cryptoassets Manual where they clearly show that HMRC does not consider buying and selling crypto assets to be gambling. HMRC are gathering lots of information from the taxpayer concerned in order to conclude what the nature of the transaction is and whether it has the character of betting or gambling as gambling is not subject to tax.
What is clear is that HMRC sees buying and selling of cryptoassets as firmly within the charge to Capital Gains Tax and Inheritance Tax for individuals and Corporation Tax for companies. HMRC makes it clear in its guidance that only in exceptional circumstances will HMRC accept that buying and selling of cryptoassets amounts to a trade for tax purposes.
HMRC consider disposal of a cryptoasset occurs when it is sold for money, exchanged for another cryptoasset, used to pay for goods or services or given away to another person (except for spouse or civil partner).
Earnings from employment in cryptoassets, reward from mining activities, staking and airdrops are also within the scope of taxation and not all costs involved in buying and selling cryptoassets may be allowable.
Generally, HMRC can track people down using their powers to obtain information about a group of people from a cryptocurrency exchange or other financial institutions.

In addition to this, the banks are already obliged to submit Suspicious Activity Reports where there is a suspicion of money laundering. Given that cryptocurrencies are generally.
considered to be high risk and we know that HMRC already has a wealth of information on people who have been involved in transactions involving cryptocurrencies.
HMRC can open an investigation if it deems the risk to be sufficiently high and the information to be credible and it has been reported that HMRC has already identified over £400,000 in tax it believes was underpaid by wealthy individuals on cryptocurrency investments in 2020 alone.
In the cases Lindsay has encountered HMRC are information gathering and running the figures through a relatively new system, with only a handful of officers of HMRC competent in dealing with this area, which can identify underlying gains etc.

If you think you have made again I’m not declared it you can declare it to HMRC through a voluntary disclosure route Lindsay can help you with this if you need advice.