Paying tax on cryptoasset transactions

HMRC recently launched a new campaign targeted at crypto investors as part of a crackdown on tax evasion. They have introduced a new disclosure and payment service for taxpayers to voluntarily disclose and pay any unpaid taxes associated with cryptoassets.

Cryptoassets (also known as tokens or cryptocurrencies) include exchange tokens (for example, bitcoin), non-fungible tokens and utility tokens.

HMRC view the profits or losses incurred from buying and selling such cryptoassets as liable for capital gains tax. Only in exceptional circumstances would they recognise crypto trading as a taxable ‘business’ trade.

Many who own cryptoassets may not be aware of the tax obligations on these digital assets. This voluntary disclosure service provides an opportunity to put things right with potentially lower penalties than if HMRC discover the underpayment for themselves.

Taxpayers must report transactions incurring capital gains during the 2022/23 or 2023/24 tax years via self-assessment returns or HMRC’s ‘real-time’ capital gains tax service.

To access the facility, users require a government gateway user ID and password, along with specific information for a comprehensive report submission.

Taxpayers must determine the number of years for which they need to declare unpaid tax, contingent on their past adherence to tax obligations regarding cryptoasset income or gains. The disclosure period could potentially span up to 20 years.

HMRC advises that anyone who’s unsure of their position should seek specialist advice. If you know you have unpaid tax due on cryptoassets, you can use this link to tell HMRC about it now.

Identifying those who haven’t paid the tax they should have done is likely to become easier for HMRC in future. Tax avoidance from using cryptoassets is currently a subject of international concern, and there are moves to require crypto platforms to share taxpayer information with tax authorities. The launch of this disclosure opportunity aligns with the UK’s commitment to joining the Cryptoasset Reporting Framework (CARF). The CARF facilitates the automatic exchange of information on crypto exchanges among financial authorities.

If you’re unsure whether you’ve declared all that you need to on your Return, whether around Cyptoassets or anything else, please get in touch. We can check your affairs and get you back on track.