Crypto Asset Unpaid Tax – Disclosure Options Launched by HMRC
HMRC is taking a more active role in recovering tax due from those involved in the crypto asset world. Get expert advice on using HMRC's new online disclosure facility and avoid severe penalties.
HMRC's New Crypto Focus
Taxpayers are being encouraged to use HMRC's new online disclosure facility to declare any unpaid taxes. This voluntary scheme covers tax due from crypto asset dealing, including exchange tokens, NFTs and utility tokens.
Whilst this initiative is described as voluntary, HMRC has made it clear that they will be taking a more proactive approach to identifying those who have not declared crypto asset income and gains.
Determining Your Tax Liability
Before you make disclosure to HMRC, you need to establish if you have a tax liability. There is the possibility that you may owe some or all of the following types of tax:
Income Tax
Crypto assets trading may have provided you with a taxable income. There may also be national insurance implications if you received crypto assets as part of your salary.
Corporation Tax
If you are a company involved in a crypto asset business or deal in crypto assets, income and gains should be included in your Corporation Tax Return.
Value Added Tax (VAT)
If you are operating as a business with a trading turnover above the VAT threshold you need to account to HMRC for VAT.
Capital Gains Tax
If you have invested in crypto assets and have sold these for gain, you may be liable to Capital Gains Tax.
Disclosure, Calculating the Tax Due, Interest and Penalties
Next, you need to work out how many years you need to declare. This will depend on why you have not previously declared the tax due. The extent of the liability, in terms of time, will depend on the reason for underreporting tax:
Reasonable Care Taken
Even though you took reasonable care but failed to include crypto assets income or gains in your return.
Did Not Take Care
You did not take reasonable care in preparing your tax returns.
Deliberate Underreporting
You deliberately misled HMRC about income and gains from crypto assets or did not submit a tax return.
Additional Costs
In addition to the unpaid tax, you will need to pay interest and penalties. The amount of penalties will depend on the reason for underreporting and can be substantial.
Payment Deadline: After you have submitted the unpaid tax calculations to HMRC, you must make full payment within thirty days of submitting the disclosure.
Disclosure Process
Determine Tax Liability
Establish if you have a tax liability across Income Tax, Corporation Tax, VAT, and Capital Gains Tax.
Calculate Years to Declare
Work out how many years you need to declare based on the reason for underreporting.
Calculate Tax, Interest & Penalties
Determine the total amount owed including tax due, interest charges, and applicable penalties.
Submit Disclosure
Submit your unpaid tax calculations to HMRC through their online disclosure facility.
Make Payment
Make full payment within thirty days of submitting the disclosure to HMRC.
What Should I Do If I Have Not Declared?
Immediate Action Required
Seek Professional Advice
Get expert legal and tax advice before making any disclosure to HMRC to ensure you understand your full liability and options.
Review All Crypto Activities
Comprehensive review of all cryptocurrency transactions, trading activities, and any crypto-related income or gains.
Calculate Full Liability
Accurate calculation of tax due, interest, and penalties across all relevant tax types and years.
Prepare Disclosure Strategy
Strategic approach to disclosure that minimizes penalties and protects your interests throughout the process.
Expert Crypto Tax Advice
Don't navigate HMRC's crypto tax disclosure process alone. Our specialist team provides expert advice on cryptocurrency tax obligations, disclosure options, and penalty mitigation strategies.
Specialist cryptocurrency tax lawyers with extensive experience in HMRC investigations and disclosure procedures.