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HMRC and your Cryptocurrency Assets

The UK Government is sending out letters to ask about cryptocurrency gains

Many people mistakenly believe that their cryptocurrency dealings can be hidden from the UK tax authorities. In fact, HMRC gets data on crypto investors through data requests to UK-based cryptocurrency exchanges. So, if you are a UK taxpayer with dealings in cryptocurrencies you may soon receive a letter from HMRC, asking you why you’ve not declared your gain.

The UK government is increasingly expressing an interest in taxpayers who have disposed of their cryptocurrency assets – specifically from the point of view of Capital Gains Tax. In this article, we look at these investigations and what they might mean for your tax position.

What are Cryptoassets?

There are many kinds of Cryptoasset – usually known as Cryptocurrencies. They are digital assets that use cryptographic techniques to generate a medium of exchange of financial transactions. Simply put, they’re a form of ‘digital money’ or a virtual currency. The currency is encrypted (secured) using cryptography to

  • make financial transactions secure
  • create additional units
  • verify the transfer of assets.

What makes them distinct from conventional currencies is that they are almost always independent of central banking systems and are founded on blockchain technology.

Why is HMRC contacting owners of Cryptoassets?

Many people mistakenly believe that their cryptocurrency dealings can be hidden from the UK Tax authorities. In fact, HMRC gets data on crypto investors through data requests to UK-based cryptocurrency exchanges. HMRC suspects that investors may be hiding their gains to avoid paying tax. As a result, It is writing to all UK domiciled investors to remind them to keep a record of their dealings and to advise them of their tax obligations. This all relates to Capital Gains Tax (CGT), which is currently due on capital gains of over £12,300 per annum. HMRC are asking holders of Cryptoassets to ensure that these assets are declared correctly. To support this, they have published detailed guidance in their Cryptoassets Manual.

When is CGT on Cryptoassets due?

Tax is due on any profit from the disposal of cryptocurrencies, which takes your total Capital Gains over the £12,300 threshold. The tax will apply whether your assets

  • are sold
  • exchanged for another crypto asset
  • used to buy goods or services

As with those holding undeclared offshore bank accounts, the issue is where the asset owner is resident. UK resident non-domiciles may mistakenly believe that their crypto-currency gains are not subject to UK tax. Key to whether CGT is payable is the legal location (known as the ‘situs’) of the asset. If the situs is deemed to be the UK, then CGT will be due.

What kind of Cryptocurrency records need to be kept?

Anyone dealing in Cryptocurrencies needs to keep the following records –

  • the type of cryptoasset involved with each transaction
  • the date of the transaction
  • whether the assets were bought or sold
  • the number of units involved
  • the value of the transaction in pound sterling (at the date of the transaction)
  • the cumulative total of the investment units held
  • bank statements and wallet addresses, in case these are needed for an enquiry or review.


Essential guidance on Capital Gains Tax with Cryptocurrency assets

If you are a UK resident, then regardless of how much time you are domiciled in the UK, it is likely that you will be liable for CGT on gains you make. We’re experts on UK Tax and Compliance. For specialist advice on tax on Cryptoassets, please get in touch.

The UK Government is sending out letters to ask about cryptocurrency gains Many people mistakenly believe that their cryptocurrency dealings can be hidden from the UK tax authorities. In fact, HMRC gets data on crypto investors through data requests to UK-based cryptocurrency exchanges. So, if you are a UK taxpayer with dealings in cryptocurrencies you […]

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