What The HMRC’s Cryptoasset Data Request Means For You

What The HMRC’s Cryptoasset Data Request Means For You

The main tax authority in the UK, Her Majesty’s Revenue and Customs, have applied to leading exchange platforms in order to find out whether cryptocurrency investors own any unpaid capital gains and income tax.

According to reports, three leading exchange platforms, CEX, EToro and Coinbase, have all been targeted by the HMRC seeking users’ transaction history to uncover whether they have made a profit on their cryptocurrency investment.

This is new move from the authority is believed to be them following in the tracks of their US counterpart, IRS. Who, earlier this year, directly contacted 10,000 cryptocurrency owners who could potentially owe the government unpaid tax.

How Could I Be Affected?

While the HMRC website states that it “does not consider cryptoassets to be currency or money”, it also explains that the “tax treatment of all types of tokens is dependent on the nature and use of the token and not the definition of the token”. As such, there is no blanket exemption from tax rules for UK crypto investors and it is all dependent on the type of crypto that is held.

The important thing to consider though is tax issues arise not upon purchasing or holding of crypto assets, but the selling. This brings into force the rules of capital gains if traders have made a profit. A £12,000 allowance for annual gains made from trading is currently permitted. With this in mind, it would be traders who are making a significant profit who are going to be at the heart of this new investigation.

The tax rules will see traders on the basic rate end of this scale pay around 10% on these earnings, but those who fall into a higher bracket should pay around 20%. This could increase to as much as 40%-45% if more than £50,000 has been accumulated.

It is believed that the transaction history that will be investigated by the HMRC will only go back 2 years, supposedly from April 6, 2017, through to April 5, 2019. As such, this would exempt those who were early to industry, but could still catch many who had significant profit during the bitcoin boom of 2017, as well as those who have made a tidy profit over the last few months of bullish market behaviour.

Gary McFarlane, a cryptocurrency expert at investment platform Interactive Investor, when speaking to UK Newspaper, The Sun, explained, “those who hoped to avoid tax by simply not declaring income on the assumption that bitcoin or another crypto is anonymous are in for a rude awakening.”

Will It Actually Happen?

Due to the fact that the HMRC work in conjunction with Financial Conduct Authority (FCA), they are in their rights to request such information, but whether exchange platforms are obliged to give the data up is a different matter.

However, of course, with the cryptocurrency world being a new industry and the fact no such request like this has been made before, the situation is still a grey area. With this mind, this move from the HMRC and the reaction from the exchange platforms will likely set a precedent for future tax years.

Currently, it is believed platforms are contemplating their next move, with CEX.IO stating they are investigating whether it must meet the tax man’s demands.

There is a £1000 fine for those who do fail to provide adequate tax returns. But, of course, traders can opt to provide their earnings voluntarily, with the possibility also to minimise tax on these earnings. This can be done by doubling your capital gains tax by sharing it with a spouse or by deducting any losses you’ve made from your gains.

Ready to join our tribe?

We respect your email privacy

Subscribe now to recieve exclusive updates and offers!

Recently Similar News

Latest Guides

Latest News

Bitcoin,CoinMarketCap,Ethereum

Cryptocurrency Market Cap Jumps Past $2 Trillion

Cryptocurrencies continue to make headline news around the world as the total market cap surpassed $2 trillion on Monday. Supported by increased interest from institutional investors, celebrities, and retail investors, digital coins are now worth more than Apple Inc. Bitcoin has, once again, played a major role in the sector’s market cap. The world’s first […]

6 April, 2021
Digital Currency,Ethereum,Stablecoin

VISA Set To Support Cryptocurrency Settlements

The global payments corporation, VISA, announced on Monday that it is making preparations to allow USD Coin (USDC) to settle transactions within its network. This move is being viewed by industry analysts as yet another clear sign that cryptocurrencies are being accepted by major institutions within the traditional financial industry. USDC was selected by VISA […]

30 March, 2021
Casino,Ethereum,Gambling

CasinoFair Temporarily Shuts Down Amid Network Congestion

The popular cryptocurrency casino, CasinoFair, has announced in a recent blog post that it will be temporarily stopping its gaming services. Citing unsustainable congestion on the Ethereum network as the main reason for this pause, the casino reassured its players that it is “actively researching solutions and hope to be back with a new range […]

26 March, 2021
Bitcoin,Coinbase,CoinMarketCap

Significant Bitcoin Drops As Coinbase Announces IPO

The cryptocurrency market is back in turmoil following yet another volatile week where Bitcoin almost reached a record-breaking value of $60,000. Bitcoin drops are nothing new, but the recent 25% decrease has caused panic amongst even traders with an experience of major currency fluctuations. The latest drop comes as Coinbase, one of the world’s largest […]

1 March, 2021
Cybercrime,Scam,Trezor

Trezor Warns Users About Fake Mobile App

Trezor is warning users of a malicious mobile application featured on Google Play which appears to be associated with the wallet provider. At least 1,000 users have already downloaded this software, and it is likely that some have unwittingly provided their seed phrase to unlock their funds. Both Trezor and SatoshiLabs have confirmed the existence […]

26 January, 2021
Bitcoin,eToro,Trading

eToro Temporarily Raises Minimum Deposit To $1,000

For the past few weeks, the increase in Bitcoin’s price has led to a massive interest in cryptocurrency trading. eToro has been overwhelmed by new registrations and has decided to temporarily raise the minimum deposit from $200 to $1,000. Although 2021 has barely gotten started, it promises to be an exciting time to invest in […]

11 January, 2021
Bitcoin,Investment,Trading

Global Cryptocurrency Market Value Surpasses $1 Trillion

Thursday has proven to be a monumental day for cryptocurrencies as the world’s combined value tops the $1 Trillion mark. Energised by a substantial rise in the value of Bitcoin in recent months, the volatile crypto market has reached a once-unreachable value. Following the latest Bitcoin Halving in May 2020, the world’s largest digital token […]

10 January, 2021
Sponsored

Victory over virus: SiGMA Virtual Expo hosts 100+ exhibitors

SiGMA Europe and AIBC Virtual Expos launch with record breaking attendance, providing a cure to the industry’s events sector In the light of this year’s changes in our everyday lives, SiGMA was close to having to stop doing what it does best; creating networks for people through the company’s iconic physical events, but luckily, the […]

26 November, 2020