HMRC to ship essential letters as a part of crackdown
HMRC might be dropping a line to certain investors as part of a major crackdown on capital gains tax, with experts warning folks not to slip up.
In the coming weeks, crypto enthusiasts could find themselves clutching important letters from HMRC, signalling the taxman’s latest blitz on those who’ve been a bit lax with their Capital Gains Tax (CGT) payments. Most investments are fair game for CGT, but it’s the world of crypto assets that’s really under the microscope due to a high rate of non-compliance, given the complex tax rules they’re subject to.
HMRC reckons a whopping 55% to 95% of these assets aren’t compliant with their CGT obligations. To set things straight, HMRC is dishing out “nudge letters” this week, with another round scheduled for dispatch next month.
If you’ve pocketed some profit by owning or trading crypto assets, it’s time to get your ducks in a row and declare those gains. You might be on the hook for not just CGT but also income tax and National Insurance contributions, depending on the nitty-gritty of how you raked in your crypto cash.
Staking crypto assets, for instance locking away your digital loot to earn interest, a bit like a fixed-rate savings account, is seen as taxable income by HMRC. And if you’re thinking of disposing your crypto assets, swapping them for a different cryptocurrency or trading them in for traditional currency, you could be staring down the barrel of a 20% CGT hit.
Speaking to The Telegraph, tax guru Paul Falvey from BDO has sent out a stark warning to investors, saying the “worst thing” they could do is to ignore HMRC’s letters about crypto tax liabilities. He pointed out: “Many owners of crypto assets may not be fully aware of their obligations and may not have filed a tax return before. They could well get a shock when this letter hits the doormat but the worst thing they could do is to ignore it.”
Falvey urged investors to get their tax affairs in order by consulting with their advisers or investment platforms for reports. The whizz also mentioned that some might benefit from specialist advice on choosing the “most appropriate disclosure facility to use”.
On top of facing an unexpected tax bill, crypto investors could also be hit with hefty late payment interest penalties from HMRC, which can reach up to 100% of the tax owed.
In a bid to clamp down on non-compliance, HMRC is teaming up with crypto companies to streamline the process of detecting and addressing these issues. The department is set to automate the process of gathering transaction data from crypto exchanges.
