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.