UK tax authorities have launched a new voluntary disclosure process for people with unreported cryptocurrency profits. HM Revenue and Customs wants the public to report profits from cryptocurrency exchange tokens, non-fungible tokens (NFTs) and utility tokens, following recent moves to crack down on corporate tax evaders.
This disclosure follows a previous program to disclose non-cryptocurrency taxes in the UK. The UK government previously estimated that between 55% and 95% of cryptocurrency holders may be breaking tax laws.
Cryptocurrency Taxpayers Should Seek Advice
Some advisers say taxpayers should get advice before using the disclosure system. Due to the complex nature of cryptocurrency taxes and the fact that years of value may remain unpaid, it is important to obtain an expert opinion. For example, it may not be clear to cryptocurrency holders which cryptocurrency asset activities gave rise to taxable gains.
Read more: How to Reduce Your Cryptocurrency Tax Obligation: A Comprehensive Guide
Daniel Howitt, head of cryptocurrency tax software provider Recap, said cryptocurrency investors could use this opportunity to understand their obligations before tax authorities have access to better data. Richard Jones, senior policy and technical manager at ICAEW, said the rapid evolution of the asset class had forced regulators to catch up.
Read more: The Best US Cryptocurrency Tax Guide for 2023
Sunak targets cryptocurrency evaders despite tax cuts
British Chancellor Rishi Sunak recently rolled out a series of tax cuts to encourage investment in the UK. Individuals could see significant cuts, with around $570 being returned to their bank accounts each month, Sunak said in a recent interview with Bloomberg’s Francine Lacqua.
But at the same time, the government is trying to crack down on tax evasion, especially in the area of cryptocurrency taxation. Last May, the government considered giving HM Revenue and Customs powers to seize digital assets held in the wallets of corporate tax evaders. It said it would discuss with wallet providers how to achieve this.
Additionally, the government recently announced that it will require customer information from cryptocurrency exchanges starting in 2027. These records will provide more insight into cryptocurrency spending habits if the government’s request is within the scope of the law.
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