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Cryptocurrency Tax: HMRC Voluntary Disclosure Service Opens

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Cryptocurrency Tax: Jack Ross Explains

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Understanding Cryptocurrency

Cryptocurrency is a type of digital or virtual currency that uses cryptography for security. Unlike traditional currencies issued by governments, cryptocurrencies operate on decentralised networks based on blockchain technology—a distributed ledger that records all transactions across a network of computers.

Popular Cryptocurrencies: Bitcoin and Ethereum

Popular examples include Bitcoin and Ethereum. Cryptocurrencies can be used for a variety of financial transactions, including buying goods and services, and have also become popular as investment assets.

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Cryptocurrency and Taxation

Like almost all other sources of income, any capital gains made from cryptocurrency are taxed by HMRC. The rules around taxation for cryptocurrencies like Bitcoin and gains made from non-fungible tokens are complex. If you are in need of professional advice on any potential crypto-assets and your tax liabilities, use the contact form below and a member of our team will be in touch to discuss next steps.

HMRC’s New Disclosure Service

HMRC has opened a new service allowing taxpayers to provide information about unpaid tax on their crypto-assets, including utility tokens, non-fungible tokens, and exchange tokens.

Disclosing Gains: Procedures and Timeframes

Any gains related to the current tax year (2023/24) or the previous tax year (2022/23) should be disclosed using the standard procedures (Self-Assessment tax returns or with HMRC’s ‘real time’ capital gains tax service). If the gains date to before the years 2023/24 or 2022/23, then you should inform HMRC using the new disclosure service.

HMRC has recently sent email correspondence to taxpayers it believes may have unpaid tax liabilities on crypto-asset gains. Taxpayers are required to determine the duration over which they must declare any unpaid tax. This decision is based upon their historical diligence in reporting liabilities or if they intentionally deceived HMRC regarding their crypto-asset earnings or gains. In some cases, this disclosure period could extend to two decades. Those uncertain about how to proceed with a disclosure are advised to consult with an expert like Jack Ross for guidance.

The CARF Framework

This service follows the recent decision by the UK to participate in the crypto-asset reporting framework (CARF). Agreed upon by numerous countries in March 2023, the CARF is a transparency standard set by the OECD. This framework enables the seamless sharing of data regarding crypto transactions among financial authorities.

Using the HMRC Portal

If you need to disclose historic gains on crypto-assets, you will need a Government Gateway ID and password to log into HMRC’s portal. If you do not have a Government Gateway ID, we have written a simple guide on how to set up your Government Gateway Account.

If you are seeking professional advice on your crypto tax liabilities, Jack Ross Chartered Accountants is here to assist. Our team of experts is well-versed in the latest regulations and can provide tailored guidance to ensure you are fully compliant. Do not hesitate to reach out to us for support. We are committed to offering the clarity and expertise you need. Use the contact form below and a member of our dedicated team will be in touch to book a free 15 minute consultation.

To determine the duration for declaring unpaid tax on cryptocurrency, consider your past tax reporting accuracy. If you have consistently reported liabilities correctly, your disclosure period may be shorter. However, if there is any history of deliberate misinformation to HMRC regarding crypto gains, the period could extend up to 20 years.

Misleading HMRC about cryptoasset earnings can lead to significant legal and financial consequences. It may result in longer periods for tax declarations and potentially higher penalties. Honest and accurate reporting is crucial to avoid these complications.

Yes, seeking professional advice for cryptocurrency tax disclosure is highly recommended. Tax regulations for crypto assets can be complex, and expert guidance ensures you accurately declare earnings and understand your liabilities, reducing the risk of future issues with HMRC.

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