Crypto tractor beam pulls in accountants
With a growing number of firms fielding queries on crypto calculations, HMRC’s policy lead for cryptoassets joined an AccountingWEB panel of experts to analyse the challenges this presents for accountants.
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At first I thought this would be the preserve of our more techie clients. But in fact all sorts of people seem to be dabbling, particularly those who I thought could least afford the risk.
So much so in fact that I have added detailed questions relating to Crypto, DeFi and NFTs to the CGT section of our 2022 tax return data request. Hopefully clients who do have activity in this area will have used proper tracking software, otherwise their tax return fees are going to be pretty high.
Good read, no scare mongering.
Agree on the sentiment that once the basic agreement is made to treat as an asset the easy part is over.
In 2021 crytpo went through another boom, its back to a low for the last few months, this will mean this coming self-assessment may see an increase in questions and panic from clients, as above these clients could have 1,000s of trades over multiple exchanges and varied rates....
Tokens (currency, utility, security..) NFTs, ICO's, air drops, staking... many different chains and wallets. Some of these trades may be on crypto held for years or just hours, spanning a number of tax years.... not all will be simple GBP > Crypto and vice versa... you will see BTC > LRC > ETH and more....
Koinly is great to help and I do recommend using this or an equivalent
Also expect KYC exchanges to share data with HMRC (expected in October 2022 ) and I also expect this year HMRC will have a better handle on how they communicate this back to individuals and potentially cause a mini rush on queries to accountants....
It would be great if AccountingWeb could query HMRC on when they expect to gather this exchange data and how they will handle it and contact individuals this year, allowing accountants to better prepare.
Also consider that leading upto the World cup we are seeing big sponsorship deals and Crypto will be front and centre, hopefully spurring the next boom.
It's an interesting point that the exchanges will be sharing their data with HMRC - I hadn't considered that.
My first thought is to wonder what HMRC will actually make of the data? And do we think they will issue "nudge" letters in a responsible way? Nah. Scatter-gun approach, as always.
Nudges were sent November last year, so I suspect something similair, maybe HMRC have improved by then ...
I dont suspect anything more than a nudge, but with KYC and how public the blockchain can be, it is entirly possible with the right technology the right person could effectively calcuate who made what profit (or loss)... good thing for most people is that HMRC will never get it right.
This could be an entirely autmated process.
We have plenty of people in our group/s that made significant profits in meme coins like Doge last year (6 figures +), whilst we do warn about the nature of KYC and risk of not declaring, a lot feel untouchable, retain massive profts in crypto and never intend on moving back to GBP.
Will be keeping a close eye on what happens post nudge letters and if/when these cases ever begin to hit the courts.
"Coinbase agreed to share data with HMRC relating to customers who received more than £5,000 equivalent of cryptocurrency. This and similar access with other crypto exchanges allows HMRC far greater reach in terms of investigating tax errors or fraud."
for anyone intrested,.....
Dogecoin had gained approximately 27,000% in just a six-month stretch between early November 2020 and early May 2021.
2,000 merchants now accept Dogecoin as a form of payment
4 million on-chain holders of Dogecoin. (global)
Anyone with just £50 in Doge prior to and cashed out in the above period would be getting a nudge letter from HMRC
I was a little wary of clicking on a link with the word "tractor" in it.....