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HMRC has cryptoasset transactions in its sights

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Some clients seem to think that cryptoasset transactions are invisible to HMRC, but with a new reporting framework on the way it’s time to add disposal of cryptoassets to your tax return checklist.

27th Mar 2024
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With 31 January a distant memory, thoughts will be turning to the 2023/24 tax return checklist run. One question that may already feature on your checklist – but if it doesn’t, should – is: “Did you make any disposals of cryptoassets in the year?”  

Something to declare

Several completely unconnected conversations over recent weeks (including some at the Festival of Accounting and Bookkeeping) have made me realise just how many people have dabbled with crypto and how few of them realise they may have something to declare for tax. 

In research published by HMRC in 2022, 10% of UK adults said they hold or have held a cryptoasset and the majority of those who had made a disposal said they had made a profit. And 58% were unaware that they might be liable to pay tax when they bought goods and services using cryptocurrency. The numbers are likely to grow: 16% considered it was likely or very likely that they would acquire cryptoassets in future. 

When I was first asked about the tax implications of cryptocurrency transactions by a client some years ago there was very little published guidance and I found myself going back to first principles. Things are, thankfully, different now and HMRC’s cryptoassets manual is a good starting point. 

But the calculations can only be done if the client realises that they have transactions that need to be disclosed. Awareness – or rather lack of it – is a very common issue as the HMRC research showed. 

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Replies (4)

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By JustAnotherUser
27th Mar 2024 15:12

cannot wait for the classic tulip analogies to start again this year.

I don't foresee much activity for the 2023/24 year when it comes to your every day citizen and crypto gains, but now we're entering the 24/25 period, plus CG at £3,000, and the crypto markets breaking all time highs, plus Bitcoin ETF's there's a very good chance a lot more people this next year will need to pay tax the year after.

Coinbase et all will supply HMRC with user data , HMRC will send nudge letters.... will much more happen, highly unlikely.

Thanks (3)
Replying to JustAnotherUser:
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By FactChecker
29th Mar 2024 22:53

"now we're entering the 24/25 period, plus CG at £3,000, and the crypto markets breaking all time highs" ... hmmm, bit more detail / bit less cryptic please.

According to https://www.bitdegree.org/cryptocurrency-prices/cosmic-guild-cg-price (which looks like a mash up between a gambling site and a 4-year old's birthday party invite):
"People also ask - What is CG in crypto?
Cosmic Guild (CG) cryptocurrency is marked as 'Untracked' because of inactivity or insufficient amount of data."

Thanks (1)
Replying to FactChecker:
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By JustAnotherUser
08th Apr 2024 09:23

CG: The government has previously announced that the CGT annual exempt amount will reduce from £6,000 to £3,000 from April 2024.

What I am attempting to explain is that the crypto markets are moving back into a period of all time high rates, this will also happen at the time of the bitcoin halving which is historically following by even more highs, it is in this period when people tend to take profits.

This will also be in a period where CG allowance is very low, which could mean even more people need to pay some tax on these profits.

In all the likelihood your average crypto owner making profits & needing to pay tax is a lot higher in 24/25 than any previous year.

Thanks (0)
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By sherodwilliams
28th Mar 2024 11:54

If HMRC research is to be accepted ie; 10% of UK Adults then that would approximate to say 67.5million x 64% being adults of working age excluding pensioners who might "dabble" in crypto x 10% would be approximately 4 million people in 2022 if as many as 75% were non taxable that would still leave 1 million potential underdeclarations . These could be subject to a penalty as well as the tax due so I would be surprised if HMRC continued to wait. After all , HMRC really don't have to do much more than obtain lists & send out letters all of which they can seemingly do fairly easily from the comfort of their "working at home "desks.

Thanks (1)