HM Revenue & Customs (HMRC) has started demanding data on digital assets from taxpayers who are being investigated for tax avoidance and evasion, according to accountancy firm UHY Hacker Young.
Moving forward, the taxman’s ‘statement of assets’ – the form used to request a complete account of a person’s assets during an investigation – will explicitly include information on cryptocurrencies and other digital assets commonly used in organised crime, including:
- Bitcoin and Ethereum;
- Assets in value transfer systems, such as Black Market Pesos, Hundi, Hawale and Fei ch’ien; and,
- Assets in e-money wallets like Paypal.
UHY Hacker Young stated that there has been growing concern over recent years that HMRC has not been able to identify cryptoassets used by tax evaders, which prompted the inclusion of digital currencies in its data gathering process.
If people lie to the taxman and are found out, they will likely face prosecution, the accountancy firm added.
Digital crackdown
David Jones, director at UHY Hacker Young, 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. 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.”
