UK Tax Authorities Launch Voluntary Disclosure for Unreported Crypto Gains Amidst Increased Crackdown
In a bid to tighten its grip on tax evasion, the UK’s tax collector, HM Revenue and Customs, has initiated a new voluntary disclosure process targeting individuals with unreported gains from cryptocurrency transactions. This disclosure encompasses earnings derived from crypto exchange tokens, non-fungible tokens (NFTs), and utility tokens, signaling a comprehensive approach to regulating the burgeoning crypto landscape.
The move follows the UK government’s recent crackdown on corporate tax evaders, reflecting a broader effort to ensure compliance within the rapidly evolving digital asset space. Previous estimates by the government suggested that a substantial percentage, ranging from 55% to 95%, of crypto holders may be unknowingly violating tax laws.
Cryptocurrency holders are urged to seek professional advice before utilizing the voluntary disclosure facility, considering the intricate nature of crypto taxes and the potential accumulation of several years’ worth of unpaid taxes. Experts emphasize the complexity of determining which crypto asset activities result in taxable gains, making informed guidance crucial for taxpayers navigating this uncharted territory.
Daniel Howitt, the head of Recap, a crypto tax software vendor, highlights that this disclosure initiative presents an opportunity for crypto investors to comprehend their tax obligations proactively, allowing them to address any potential discrepancies before the tax authorities access more robust data. Richard Jones, a senior technical manager of policy at ICAEW, acknowledges the regulatory challenge posed by the swift evolution of the crypto asset class, emphasizing the need for regulators to catch up with its progress.
Despite recent tax cuts introduced by British Prime Minister Rishi Sunak to stimulate investment, the government remains steadfast in its pursuit of crypto tax evaders. The tax cuts, designed to encourage investment and potentially return around $570 per month to individuals, run parallel to the government’s intensified efforts to curb evasion, particularly in the realm of crypto taxes.
In a bold move, the government is exploring granting HM Revenue and Customs the power to seize digital assets held in the wallets of corporate tax evaders. Additionally, the impending requirement for crypto exchanges to furnish customer information starting in 2027 aims to provide the government with deeper insights into crypto spending habits, within the bounds of legal constraints. These measures underscore the government’s commitment to balancing economic incentives with a robust regulatory framework in the dynamic world of cryptocurrencies.
