In recent years, cryptocurrencies have experienced remarkable growth and change. As digital assets like exchange tokens, NFTs (non-fungible tokens), and utility tokens become more prevalent, it becomes crucial for investors to understand and comply with cryptoassets Tax regulations. HMRC has introduced a new online disclosure facility to address unintentional oversights in reporting income or gains from crypto assets.
It’s possible that crypto investors may not have fully adhered to UK tax laws in the past, inadvertently overlooking the need to report income or gains from cryptoassets. To address this, HMRC has launched an Online Disclosure Facility. This allows taxpayers to voluntarily inform HMRC about any unpaid tax related to their crypto assets, such as exchange tokens like bitcoin, NFTs, and utility tokens.
The taxation of cryptoassets is complex, and each transaction may have distinct tax considerations. Whether you’ve earned income from trading exchange tokens, profited from NFT sales, or engaged in utility token transactions, you must be aware of potential tax impacts. Seek advice from a qualified tax professional to navigate this intricate landscape.
If you suspect unpaid tax on your cryptoassets, it’s in your best interest to address the issue proactively. Voluntary disclosure demonstrates a commitment to compliance and leads to more favourable outcomes than waiting for HMRC to discover discrepancies. Utilizing the Cryptoasset Disclosure Facility allows individuals to provide HMRC with a comprehensive overview of their cryptoasset-related activities, including income, gains, and transactions.
1. Notify HMRC: Use the official HMRC online portal to initiate the voluntary disclosure process.
2. Preparing the Disclosure: Work with a tax professional to calculate outstanding UK tax liabilities, interest, and penalties. Gather all relevant information about your cryptoasset transactions within the 90-day window.
3. Submitting the Disclosure: Submit the disclosure online with accompanying documents and a side letter explaining calculation methods.
4. Payment of Outstanding Tax: Settle any unpaid tax promptly, ideally at the same time as the disclosure submission.
Following the adoption of the Crypto-Asset Reporting Framework (CARF), which facilitates the automatic exchange of information between global tax authorities, avoiding any potential tax-related issues is crucial. Waiting for HMRC to contact you may result in higher penalties.
Individuals can register on HMRC’s website or appoint a tax adviser to make the disclosure on their behalf. The disclosure should cover the years with unpaid tax, penalties, and late payment interest. Once submitted, the individual must promptly pay the outstanding tax, interest, and penalties.
As the crypto landscape continues to evolve, understanding and complying with tax regulations is paramount for investors. The introduction of HMRC’s Cryptoasset Disclosure Facility allows individuals to rectify any oversights and ensure compliance with tax obligations. Taking proactive measures and seeking professional advice will contribute to a smoother disclosure process and favourable outcomes in the rapidly changing world of crypto-assets.
In the dynamic world of cryptoassets, staying on top of tax obligations is crucial. Our qualified Accountants and Tax Advisors in UK offer assistance in collating and calculating your cryptoasset tax position. Our Crypto Tax Specialists, Tax Disputes, and Disclosure experts can guide you through the disclosure process, ensuring your tax affairs are up-to-date on the best available terms.
If you have concerns about undisclosed tax liabilities related to your crypto activities or any other irregularities in your tax affairs, reach out to Lanop accountants for expert advice. Your proactive approach to tax compliance can lead to a smoother resolution with HMRC, minimizing penalties and ensuring your financial affairs are in order.
Aurangzaib Chawla is a UK-based tax advisor and Managing Partner at Lanop Business & Tax Advisors. With nearly two decades of experience, he supports individuals, landlords, and SMEs with proactive tax planning and compliance. Known for simplifying complex tax legislation, Zaib helps clients minimise liabilities while building sustainable, tax-efficient strategies for long-term success.
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At Lanop, I am providing my services as the Managing Partner and Tax Specialist. My expertise includes helping medium and small-scale businesses in their accountancy and legal requirements, business start-up support, strategic review, payroll system review and implementation, VAT and tax compliance to cloud accounting. I am also an expert in financial reporting, identifying and monitoring risks, strategic business development, client retention, market acquisition and deals closure by carefully planning my sales cycle.
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