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If you invest in cryptocurrency (exchange tokens, non-fungible tokens and utility tokens), then you should be aware that HMRC is gathering information from various sources and will be writing to people who have not paid tax on their income or capital gains. It’s better to declare if you have been investing rather than wait for HMRC to write to you.

Cryptocurrency providers have been sharing with HMRC details of individual taxpayers who have been active on their crypto exchanges and the transactions involved. This information can now be used by HMRC to track down non-compliant taxpayers.

From the information received so far, HMRC can see that many individuals have been involved in buying and selling cryptocurrencies over the past few years without reporting these transactions on their self assessment tax returns. This may be for several different reasons, including not understanding how the tax rules apply and the relative uncertainty around these assets.

Recognising this, HMRC has launched a new online disclosure facility to allow individuals to voluntarily report tax that is due for earlier years. By coming forward to HMRC, penalties for non-disclosure of tax liabilities are often lower than otherwise would be, so it makes good sense to use this facility if you haven’t yet declared investment gains.

While cryptocurrency was first introduced in January 2009, HMRC can request up to 20 years’ worth of records where it suspects an individual has been acting deliberately either to conceal their true tax position or defraud HMRC of tax owed. However, in cases where an individual has simply made a mistake, this can be limited to six years.

The sooner an individual comes forward then the more likely HMRC is to treat the taxpayer more favourably both in terms of penalties and time periods open to enquiry.

Usually, any outstanding tax beyond the normal payment deadline accrues interest, currently at a rate of 7.75%. Therefore, the sooner an individual comes forward, calculates the tax owed and pays it, the lower the interest charge will be.

  • We’ve created a useful fact sheet, click here to view, to help you understand taxation of cryptocurrency in more detail.
  • Please contact our tax partner Masum Ahmed if you need further advice on this issue.

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McBrides Chartered Accountants