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Out-Law News 2 min. read

HMRC facility promotes cryptoasset-related tax disclosure

Individuals can now voluntarily declare tax they owe on cryptoassets transactions in the UK after HM Revenue and Customs (HMRC) opened a new online disclosure facility.

There are existing options for disclosing unpaid tax to HMRC more generally, but this new facility is limited to cryptoasset-related tax. It also appears to be limited to disclosures made by individual taxpayers and is not open to corporate taxpayers. 

Sophie Warren, tax expert at Pinsent Masons, said: “The tax treatment of cryptoassets has been an area of confusion for many taxpayers, who may have ‘dabbled in crypto’ without fully understanding the tax consequences of what they were doing. While this opportunity does not come with any exceptional benefits, taxpayers who disclose their underpaid tax voluntarily benefit from reduced penalties because they have made an unprompted disclosure. In addition, interest on overdue tax, which is now being charged at 7.75%, will stop accruing once payment is made.”

“With the launch of this new facility, taxpayers will hope that their disclosures will be reviewed by a team within HMRC which has an understanding of crypto transactions,” she said.

The disclosure facility is designed along very similar lines to other online disclosure facilities HMRC also operates. The taxpayer, or their approved agent, has to complete the online form using the government gateway. In addition to filling out the taxpayer’s identifying information, the taxpayer must provide information on how many cryptoasset exchanges they used in a given tax year; how many types of cryptoasset they bought or sold in the year; and whether they have used a commercial cryptoasset calculator. The disclosure requires the taxpayer to input the tax payable in the year, including allowable costs when considering capital gains treatment, but also enables a file to be uploaded showing how the total calculations have been reached.

The launch of this facility comes only a few weeks after the UK government announced its intention, alongside the US, Ireland, and other nations, to implement the cryptoasset reporting framework (CARF), which is a new international standard on automatic exchange of information between tax authorities developed by the OECD. The UK expects to implement it so that exchanges of information can occur from 2027.

Steven Porter, tax expert at Pinsent Masons, said: “Taxpayers who think that they may have missed reporting their income and gains on cryptoassets would be well advised to consider using this opportunity to regularise their affairs before HMRC gets access to information to enable them to pursue taxpayers directly. The complexity of the taxation of cryptoassets means that it is not advisable to try to unpick the tax position without specialist advice.”

Calculating cryptocurrency taxes can be complex, including establishing whether capital gains tax or income tax is the relevant tax and due to the variety of transaction types.

Hinesh Shah, forensic accountant at Pinsent Masons, said: “Analysing disposal proceeds against purchases and calculating cost bases, especially where there has been significant transaction activity, adds complexity. Each transaction – even passive ones such as receiving interest or tokens from staked cryptoassets – may trigger taxable events. Consideration of these factors is crucial when determining total tax amounts due and individuals making voluntary disclosures should maintain detailed records of their tax computations.”

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