Cryptoassets

02.08.2022
Natalie Miller
Tax
Cryptoassets

Although cryptoassets may seem like a niche area to some, HMRC are continuing to monitor the way in which such assets are held, traded, and taxed.

Cryptoassets

HMRC’s annual report suggested that, while unpaid tax on cryptoassets remains lower than on other transactions, it has increased by more than 400% in a year to £2.2m.  However, the report points out that this is a ‘snapshot’ based on current enquiries into ‘inaccuracies’ and if those enquiries are increasing due simply to both increased HMRC interest and greater taxpayer activity, this does not necessarily reflect an increase in deliberate misreporting of transactions.

More considered points can be gained from the conclusions of a specific research project into cryptoassets which HMRC commissioned an independent firm to undertake.  HMRC wanted to estimate the number, types, behaviours, and characteristics of people who invest in cryptoassets.  The report findings suggest that such transactions are increasing in popularity, particularly among younger investors, but that they are beginning to be seen as a more mainstream activity on which general financial advice should be taken.  At the same time, more than half of the owners identified were aware that there was a potential tax charge, less than a third had read HMRC’s guidance and only 16% had sought tax advice.

HMRC are certainly aware of the potential for misreporting or even evasion within the crypto arena – they have issued a new Manual, seized non-fungible tokens (frequently acquired using cryptocurrency) in a fraud enquiry, confirmed that they will regulate some forms of cryptocurrency, and commenced further consultation on the treatment of certain types of finance related to crytpo assets. The hope must be that, at the same time as pursuing deliberate failures, HMRC also take steps to provide clearer guidance for those who genuinely wish to report their activities correctly. This could be particularly important for those who may have realised losses on their investments in the recent turbulent times and could otherwise miss out on tax relief.

Read our general article on the taxation of cryptoassets here.

Written by Natalie Miller, Member of the CIOT/ATT Cryptoassets working group

Read the full article here

If you are involved in any cryptoasset transactions, make sure that you speak to your usual agent, or come to us for financial management and/or taxation advice.


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