Dorchester Chamber members Milsted Langdon explore the challenge HMRC have chasing unpaid tax owed on cryptocurrency investments.
With HMRC under increasing pressure to add to Government revenues, they have continued their hunt into new areas of suspected tax evasion, such as cryptocurrencies.
HMRC figures show that there has been a 432 per cent increase in the amount of unpaid tax that wealthy individuals are thought to owe on their cryptocurrency investments.
HMRC says that it identified £2,280,000 in suspected underpaid tax relating to cryptoassets in 2021-22, up from £428,000 in the previous year.
Despite the recent cryptocurrency crash reducing gains for many investors, HMRC is likely to continue to scrutinise wealthy crypto investors it believes are underpaying tax.
HMRC has prioritised collecting tax from crypto investments, as the asset class has grown rapidly in popularity and value over the last few years. HMRC’s intent was evident in February this year when it seized Non-Fungible Tokens valued at £1.4 million.
HMRC is rapidly improving how it tracks and traces cryptoassets, with its methods of identifying tax evasion likely to become increasingly sophisticated.
The tax authority has contacted some crypto exchanges, including Coinbase, CEX.IO and eToro, to request customer information and transaction histories.
HMRC has also sent nudge letters to cryptoasset holders to declare unpaid tax on their holdings. There is also the possibility of greater cooperation from overseas tax authorities, making it more difficult for wealthy crypto investors to hide their assets offshore.
HMRC has sent speculative letters to taxpayers, asking them to sign confirming that they do not owe any tax from cryptocurrency gains.
Before either signing or ignoring any letter you receive from HMRC, it would be prudent to seek professional advice first to consider your personal circumstances and to get a clear and accurate assessment of your actual tax liabilities.
Across all asset classes, HMRC identified large amounts of potential unpaid tax by wealthy individuals. These include:
- Capital Gains Tax: £542,800,000 believed to have been underpaid.
- Inheritance Tax: £328,690,000 believed to have been underpaid.
Tax investigations can be incredibly stressful and costly for those involved. Our Tax Investigation Service can help protect you against the cost of most tax investigations.
Find out more by getting in touch with our tax team.