HMRC have announced that during recent investigations, taxpayers are being told explicitly to list any holdings they have in Bitcoin and other cryptocurrencies.
Whilst it has always been a necessity to declare all assets, HMRC have added a new ‘crypto holdings’ section to the statement of assets form on the tax return for the first time. Taxpayers are being asked specifically about other less common ways to hold money, such as “community and informal banking accounts” and foreign exchange accounts.
Whilst the trading of cryptocurrencies is a much sought after goal these days, it is worth noting that due to the fact that holdings of digital currencies are much harder for the authorities to trace than traditional assets, HMRC have said that for those that fill in the new form, the information provided will be checked.
The tax office has said: “When HMRC request a declaration of all a person’s worldwide assets in an investigation, HMRC have always clearly requested on the form a full declaration of all assets and liabilities in whatever form, regardless of how or where these assets are held.
It added that such assets should all have been included previously on any statement of assets form that was completed, if necessary, under the heading of “other assets”.
A spokesman said: “The majority of individuals and businesses pay the tax that is due. However, there remains a determined minority who refuse to play by the rules.
“We take robust action to make sure that everyone pays the tax due – from individuals operating in the hidden economy through to action against sophisticated organised crime groups, and complex investigations into offshore structures used to hide earnings and other assets.”
HMRC have long been of the view that the trading of digital assets such as Bitcoin is charged to Capital Gains Tax rather than income tax and the addition of this section in the return further confirms this theory.
The price of Bitcoin and other cryptocurrencies has soared in recent months and many investors are likely to have made big gains. Capital gains tax will be due if these gains exceed the annual allowance of £12,300.
We were however disappointed to read that the Bank of England recently played down the importance of cryptocurrencies by stating that investors should be prepared to ‘loss all of their investment’ and they ‘hold no intrinsic value’. Despite the government launching a Central Bank Digital Currency (CBDC) the Bank of England clearly have a dim view on the future of the crypto and blockchain sector.
At Myna we are here to support all of your crypto tax and accounting needs. We are built on the principle of assisting our clients become more efficient and ultimately grow their business or investments. If you require support on filling your crypto tax return with HMRC or you operate or trade in a crypto or blockchain focused business then please speak to our dedicated team today on firstname.lastname@example.org or call 01242 388584.