Disclosing historic cryptoasset tax liabilities

13 Dec 2023

Are you a crypto investor who has not declared your cryptoasset tax liabilities in the past? If so, you may be facing a hefty penalty from HMRC if you do not act soon. In this blog post, we will explain why you need to disclose your historic cryptoasset tax liabilities and how we can help you with this process.

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Cryptoassets are not considered as legal tender in the UK, but they are subject to tax rules depending on how they are used and disposed of.

According to HMRC, cryptoassets are generally taxed in the following ways:

  • If you buy and sell cryptoassets as an investment, you may have to pay capital gains tax (CGT) on the gains or losses you make.
  • If you receive cryptoassets as a form of payment, such as from mining, airdrops, or hard forks, you may have to pay income tax (IT) and national insurance contributions (NICs) on the value of the cryptoassets you receive.
  • If you are a trader or a business that deals with cryptoassets, you may have to pay corporation tax (CT) or income tax (IT) on the profits or losses you make.

Why do you need to disclose your historic cryptoasset tax liabilities?

HMRC has been increasing its efforts to identify and pursue cryptoasset tax evaders in recent years. It has issued information notices to cryptoasset exchanges and platforms, requesting details of their customers and transactions. It has also launched a dedicated Cryptoassets Taskforce, which aims to ensure that individuals and businesses comply with their tax obligations and pay the right amount of tax.

If you have not declared your cryptoasset tax liabilities in the past, you may be liable for penalties, interest, and even criminal prosecution. The penalties can range from 0% to 100% of the potential lost revenue (PLR), depending on the behaviour, disclosure, and cooperation of the taxpayer. The PLR is the amount of tax that HMRC would have collected if the taxpayer had complied with their obligations.

However, there is a way to reduce or avoid these penalties by making a voluntary disclosure to HMRC. A voluntary disclosure is when you tell HMRC about your undeclared income or gains before they find out about them. By doing so, you can benefit from the following advantages:

  • You can get the best possible terms for paying what you owe.
  • You can reduce the penalties to a minimum, or even zero in some cases.
  • You can avoid the risk of prosecution and criminal conviction.

How can we help you with your disclosure?

We are a team of qualified and experienced accountants who specialise in cryptoasset taxation. We can help you with your disclosure by providing the following services:

  • Review of your cryptoasset transactions and calculate your tax liabilities for each tax year.
  • Advise you on the best way to make a disclosure to HMRC
  • Prepare and submit your disclosure report and tax returns to HMRC on your behalf.
  • Negotiation with HMRC on the amount of tax, interest, and penalties you have to pay.
  • Support throughout the disclosure process and deal with any queries or challenges from HMRC.

If you are interested in our services, please contact us today for a free consultation. We will be happy to discuss your situation and offer you a tailored solution.

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