UK taxman HM Revenue and Customs (HMRC) will begin issuing “nudge” letters to cryptocurrency investors.
They will be used to encourage investors to examine whether they have paid the correct sums of capital gains tax (CGT) and income tax on their crypto holdings.
HMRC has the ability to gain a full list of cryptocurrency holders by sending data requests to UK-based cryptocurrency exchanges and other financial institutions.
A spokesperson for HMRC told International Adviser: “We want to help people get their tax affairs right and we regularly undertake activity to educate customers who might need help. Our letter asks cryptoasset holders to review their transactions to ensure that they are declared correctly.”
Graham Boar, tax partner at UHY Hacker Young, said: “HMRC has announced that it will begin issuing ‘nudge’ letters to cryptocurrency investors who they believe may have underpaid tax. It is likely that HMRC believes large amounts of CGT and income tax generated from cryptocurrency investments have been undeclared for tax purposes.
“In some cases, this could constitute criminal tax evasion.
“HMRC suspects that there is an increasing amount of hidden wealth thanks to the rise of cryptocurrencies. Many retail investors in cryptocurrencies are under the misunderstanding that HMRC is unable to find out about their crypto investments and any gains they may have made.
“Investors should come forward to declare their cryptocurrency income. Those who are later found to have misreported their crypto holdings could be at risk of prosecution.”
