HMRC Urges Coinbase Customers to Disclose Bitcoin Holdings
HMRC is currently writing to Coinbase account holders in the UK.
Coinbase operates a cryptocurrency exchange platform – an app allowing you to buy, store and trade different cryptocurrencies including Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic and Litecoin.
The notice requires disclosure of customers with a UK address who received payments of more than £5,000 in fiat currency out of electric stored value payment services during 2019 and 2020 tax years.
HMRC recommends you speak to your tax advisor with questions on this and check out published HMRC guidance on taxation of crypo assets. HMRC also offers an option to submit a disclosure using the Digital Disclosure Service, which gives individuals and companies a chance to bring their tax affairs up to date.
Cryptocurrencies are UK regulated in terms of activities of exchange providers, issuing of new cryptocurrencies and UK custodian wallet providers. There is no specific legislation on cryptocurrencies or ‘Non-Fungible Tokens (NFTs)’ in the UK, other than regulating these activities.
These decentralised digital currencies are extremely volatile. Taking cryptocurrency as payment can be risky – the price can go up or down fast and there is room for those that do understand the currency to take advantage of those that don’t – with a real risk of losing a lot of money. The activity is not illegal, but key to compliance is understanding tax obligations in order to make informed decisions.
Do not ignore
HMRC has written to UK based cryptocurrency exchanges, asking them to provide client information – those buying and selling cryptocurrencies. While many people buying and selling cryptocurrency and NFTs may be unaware profits and gains should be taxed, once they receive a letter, they can no longer plead ignorance. If you ignore a letter, HMRC is likely to consider charging high penalties when making an assessment. With the rise of cryptocurrencies, HMRC has been taking an interest in handling them. HMRC ‘nudge letters’ (reminders you might need to make a declaration) to cryptocurrency investors should not be ignored.
It should be emphasised, as with investing in any assets, there is nothing wrong with investing in crypto assets. The key is understanding your tax obligations so that you can make informed decisions.If you’d like to go discuss your tax position in relation to crypto and other digital assets let’s talk.