Last updated: 20 Feb 2024 12:00 Posted in:
HMRC’s is stepping up efforts to increase it tax take from firms and individuals dealing in cryptocurrencies, according to accountancy giant UHY Hacker Young.
It has opened a new tranche of tax investigations, sending enquiry letters to crypto investors requesting information on how they funded their crypto investments, how they have determined what element of their cryptocurrency profits are subject to income tax and Capital Gains Tax and how they deduct losses from their tax bills.
UHY Hacker Young said its research found that crypto investors who receive a letter are being asked to send documents to HMRC recording their cryptocurrency transactions and income earned from their crypto holdings.
It added that HMRC has only given taxpayers one month to respond, “causing stress and anxiety among those taxpayers”.
UHY Hacker Young partner Neela Chauhan said that crypto investors should be very careful of incorrectly giving HMRC the false impression that they are traders.
Chauhan said: “HMRC’s war on crypto tax avoidance has now stepped up another gear. Responding to an enquiry letter from HMRC can be a real minefield. Anyone who has received one of these letters needs to be extremely careful to be very accurate in how they respond. Getting it wrong can have hugely expensive consequences.
“The tax rules for cryptocurrency are quite open to misinterpretation. This means that there is a chance that a taxpayer could accidentally leave HMRC with the impression that they’re trading professionally and open them up to income tax.
She added: “Anyone getting one of these letters really should take professional advice before responding.”
The tax authority is also keen to target crypto as a source of tax revenue as 4.97m people in the UK own some cryptocurrency as of 2022.
