UK investors may be liable for up to 20 years of 'unpaid tax on cryptoassets'

cyptouser3 months agoCryptocurrencies News74

The UK government has revised its approach to taxation on crypto, introducing a more structured process for reporting and paying any unpaid taxes in this domain. As per HM Revenue & Customs’ latest publication, dated Nov. 29, individuals and entities dealing with “cryptoassets” must adhere to specific guidelines to ensure compliance with tax obligations, reporting any past unpaid tax on digital assets.

This move signifies the government’s increasing focus on crypto, including exchange tokens, NFTs (non-fungible tokens), and utility tokens, which are specifically mentioned. Additionally, the announcement emphasizes the importance of self-reporting for individuals with undeclared income or crypto gains. The failure to report such earnings can lead to additional interest and penalties. Taxpayers must have a Government Gateway user ID to initiate a voluntary disclosure, and the process requires detailed information about the digital assets, including personal details, National Insurance number, the nature and volume of transactions, and the related financial figures.

The guidelines also outline the steps to determine the extent of unpaid taxes. This includes understanding the duration for which the unpaid tax must be declared and calculating the owed Capital Gains Tax (CGT) and Income Tax, along with any applicable interest and penalties. The degree of care the taxpayer takes in their tax affairs affects the years they must report and pay – ranging from four years in cases of “reasonable care” to twenty years for those who “deliberately misled HMRC.”

According to HMRC’s guidelines, taxpayers might need to pay CGT when engaging in various transactions with their digital assets. These include selling tokens, exchanging them for different digital assets, using tokens to pay for goods or services, or giving them away to someone other than a spouse or civil partner.

Implications for crypto users.

The updated guidelines from HMRC highlight the government’s desire to integrate cryptocurrency transactions into the mainstream taxation framework. The move indicates the broader trend of regulatory bodies worldwide seeking to establish explicit tax norms for digital assets.

One of the critical aspects of the updated policy is the emphasis on timely disclosure and payment of taxes. Taxpayers are required to pay the total amount owed within 30 days of making their disclosure to HMRC. This deadline is strict, and failure to comply can lead to penalties, including interest charges.

After payment, HMRC will confirm whether the disclosure is accepted, signifying that the unpaid tax has been cleared. HMRC will communicate the next steps to the taxpayer if the disclosure is not accepted.

In cases where taxpayers cannot pay the total amount, HMRC advises immediate communication upon receiving the payment reference number. Taxpayers must provide comprehensive financial details, including income, outgoings, assets, and liabilities. This information helps HMRC to assess and possibly agree to a new payment arrangement.

Staying informed and compliant with such regulatory changes is essential for individual investors and corporate entities in the cryptocurrency sector.

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