HMRC targets UK cryptocurrency investors

UK investors in Bitcoin and other cryptocurrencies are being warned to check whether they are liable for Capital Gains Tax (“CGT”).

It has been reported that HMRC asked a number of cryptocurrency platforms to provide the names and addresses of UK residents who have used their platform.

HMRC regularly gathers data from a range of information sources using powers provided by Parliament.

TAX ON CRYPTOCURRENCY

Despite HMRC previously suggested that some cryptocurrency transactions may be exempt from tax as gambling profits, in December 2018, HMRC clarified that for most investors, digital currencies will be subject to CGT.

This means individuals must calculate the gain or loss whenever they “dispose” of a cryptocurrency at the sterling equivalent value on the day of disposal.

HMRC further clarified a “disposal” arises when:-

Selling cryptocurrency for money (e.g. GBP, USD, EUR)
Exchanging cryptocurrency for a different cryptocurrency (e.g. exchanging Bitcoin to Ripple)
Using cryptocurrency to pay for goods or services (e.g. paying fees on trades, paying fees on withdrawals and deposits of cryptocurrency, buying a coffee or paying for accountancy services)
Giving away cryptocurrency to another person

Although most cryptocurrency investors would benefit from an annual CGT tax free allowance of up to £12,000 (for any disposals made in the tax year 2019/20), where gains are not covered by the allowance, there may be a tax charge of 10% or 20% depending on whether the investor is a basic or higher rate taxpayer.

Taxpayers who have not reported crypto gains will need to make a disclosure to HMRC either via Self assessment tax returns or using the Digital Disclosure Service.

INTRODUCTORY MEETING

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IAN LEIGH

Tax Partner

Ian is a Chartered Accountant who has specialised in tax since 1985. Ian advises owner managed businesses, public companies, private clients and trusts on the broad range of taxes and has extensive experience of international tax, domicile and residence issues. Ian also has significant experience in dealing with HMRC tax investigations and disputes including Section 9A enquires, the Worldwide Disclosure Facility Code of Practice 9 and the Contractual Disclosure Facility.

ANDREW LEWIS

Tax Manager

Andrew manages the firms personal tax department, including a portfolio of personal tax clients such as High Net Worth Individuals, Self Employed, Directors, Landlords, Non-Residents and Partnerships. Andrew also has significant experience in dealing with HMRC tax investigations and disputes including Section 9A enquires, the Worldwide Disclosure Facility (WDF), Code of Practice 9 and the Contractual Disclosure Facility.