HMRC to demand cryptocurrency holding data from taxpayers as investor interest rises | Personal Finance | Finance
HMRC is keen to stop money from organised crime “slipping through its fingers” and as such, it is to begin demanding data on holdings of cryptocurrencies from taxpayers it suspects of tax evasion and avoidance according to UHY Hacker Young, the national accountancy group. These crackdowns are coinciding with an explosion of interest in cryptocurrency investment, as digital assets such as Bitcoin and Dogecoin see their prices skyrocket.
According to UHY Hacker Young, HMRC has become increasingly concerned over recent years the tax authority has not been able to identify cryptoassets used by tax evaders.
This new demand for data on these assets is a further step in its attempt to get to grips with the problem.
UHY Hacker Young warned those who are found to have lied to HMRC about their assets can expect to be prosecuted.
David Jones, a Director at UHY Hacker Young, commented on this. He said: “HMRC suspects that an increasing amount of hidden wealth is slipping through its fingers thanks to the rise of cryptocurrencies and other unsanctioned money transfer systems. This demand for information is an important step in HMRC’s fightback against that.
“The initiative comes hand in hand with HMRC’s publication of its new Cryptoassets Manual.
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“A defence of ignorance of the law in this booming sector will no longer wash with the taxman.
“Some assets like Black Market Pesos are almost exclusively used by organised crime but criminal proceeds flow through relatively mainstream assets like Bitcoin at a rate that some find alarming.
“For example, cybercriminals overseas take virtually all of their ransom payments in Bitcoin to avoid detection.
“While criminals can still choose to not declare these assets, doing so gives HMRC another opportunity to bring criminal charges against them if their forensic work finds a hidden Bitcoin wallet.”
These changes are set to hit the crypto market just as British interest ramps up.
Recently, Invezz.com, utilising the online analytics tool Ahrefs, looked into which countries in the world are most interested in cryptocurrency.
According to its findings, the UK is in third place with an average of 648,000 online searches about cryptocurrency each year.
India came in second with 804,000 and the United States took the top spot with 2,556,000 searches.
Regulators also appear to be closing in on cryptocurrencies as in January the FCA issued a warning to consumers of the risks of investments advertising high returns based on cryptoassets.
The FCA warned at the time: “The FCA is aware that some firms are offering investments in cryptoassets, or lending or investments linked to cryptoassets, that promise high returns. Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money. If consumers invest in these types of product, they should be prepared to lose all their money.”
Specifically, it noted concern over the following:
- Consumer protection: Some investments advertising high returns based on cryptoassets may not be subject to regulation beyond anti-money laundering requirements.
- Price volatility: Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.
- Product complexity: The complexity of some products and services relating to cryptoassets can make it hard for consumers to understand the risks. There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.
- Charges and fees: Consumers should consider the impact of fees and charges on their investment which may be more than those for regulated investment products.
- Marketing materials: Firms may overstate the returns of products or understate the risks involved.
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