Cryptoassets: Holders nudged into CGT space
HMRC has launched an educational campaign targeting those who have transacted cryptoassets, to highlight the need to consider Capital Gains Tax. What does this mean for cryptoasset investors?
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A waste of postage that. What % of these people will (properly) declare their gains? I would be amazed if it's more than 1%. A classic recent example of someone (an accountant no less) not understanding the above basic CGT issues is here: https://www.accountingweb.co.uk/any-answers/portuguese-tax-residency
Q: Why is this a waste of time?
A: "HMRC is not expecting that everyone in receipt of the letter will have liabilities. Not everyone with cryptoasset holdings is a serious investor."
There isn't anything in the article (or presumably HMRC's sights regarding cryptoassets) that couldn't have been said equally about, say, holding savings in a foreign currency. But anyone I know who keeps a few thousand in, typically, US$ and from time to time extracts say 10% of the account as UK£ ... doesn't regard this as a trading activity - and certainly doesn't declare it (as a gain).
What is different with cryptoassets is the volatility of the 'coins' and the sense that it's all part of the virtual (not real) world ... so a little 'dabbling' can quickly turn into an undisputed trading activity - but, like the frog in the gently heated water, the taxpayer doesn't feel the change.
Perhaps HMRC would be better providing clearer definitions of things like 'a serious investor' before focussing on the latest buzz-word ... but then that would be both logical and helpful so I guess it's a non-starter.
Gains/losses on foreign currency bank accounts have not been subject to CGT since 6.4.12. https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg78321
https://assets.publishing.service.gov.uk/government/uploads/system/uploa...
Whoops, there I go falling behind the times again ... but thanks for the update! At least that explains why my acquaintances aren't declaring the gains.
But I still think my final para stands.
Otherwise what happens when some lucky s0d buys a grand's worth of bitcoins, watches as they treble in value over a few months and then spends 10% of them in purchasing a mobile phone (thereby only costing £100 of initial investment but obtaining a £300 phone)?
Or rather, what does HMRC expect to happen (given that nothing actually will)?
But only the likes of the person in the above link would think otherwise (and granted there are plenty like him!).
Gains/losses on foreign currency bank accounts have not been subject to CGT since 6.4.12. https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg78321 slope game
https://assets.publishing.service.gov.uk/government/uploads/system/uploa...
I definitely agree.
The whole area of Crypto "investment" is fraught with all sort of problems. There are those (like me) who believe that buying Bitcoin is no different from putting a grand on the nose on Fancy That in the 3.30 at Newmarket. But gambling has never been regarded as a taxable activity (except perhaps for so-called professional gamblers, who might be argued to be trading!)
And I shudder to think about the practical consequences when this South Sea Bubble eventually pops, as it is bound to do at some point, thus crystallising millions and millions in capital losses.
Interestingly on this last point, HMRC already regards CFDs (contracts for difference) as within the scope of CGT for "retail" investors, despite statistics from the CFD promoters themselves which show that between 70 and 80% of retail investors will lose money on CFDs. Is the game worth the candle, HMRC??
If they clean themselves out losing money on CFDs etc they may never be in a position to use the losses they generate.
The trouble with allowing retail investors to participate in effectively margin trading is that a lot of the participants are really, really, stupid.
(I once had a computer game where one could try all these exotic products, sometimes I won but very often I lost everything, at least with fully owned shares unless the company is effectively insolvent you usually still have something left, a share dropping 30% at least leaves you 70%)