British Tax Authorities Getting Tough on Crypto Earners

HM Revenue & Customs, the British tax authority, is starting to lean in on cryptocurrency? exchanges, demanding they reveal information about their customers. The tax authority is looking for information such as names and transaction? histories to work out if there are people avoiding tax through cryptocurrency?.

HM Revenue & Customs has sent demand letters to at least three exchanges doing business in the U.K. – Coinbase, eToro and CEX?.IO – in the last week or so, however it is unclear as to the direction any of these companies have taken with the letters.

Getting to grips

If the tax authority is looking to get a handle on those cryptocurrency? users who have profited from capital gain, it could be a long and difficult process. Veteren cryptocurrency? users are more likely to have accumulated a lot more wealth, and could be at the biggest risk in regards to a tax audit. 

However, an industry insider has deduced that this tax investigation is probably not as aggressive as it could be.

HM Revenue & Customs is looking to work with exchanges when it comes to finding information on people who have been buying and selling crypto. I think they will only go back a couple of years, two or three years,” said one industry insider.

The source also said that going back as far as 10 years or so would be very difficult to provide. 

“If HM Revenue & Customs do only go back two or three years, I think the interesting thing here is, that the individuals who went into crypto very early on in 2012-13 will not be affected. The ones who probably made the largest gains won’t be affected, it will be the people who came in around the time crypto peaked.”

They have the power

There has often been questions asked as to the power that governmental agencies have when it comes to demanding customer information from cryptocurrency? exchanges. With cryptocurrency? being pseudo-anonymous, the rights of customers are at stake. 

However, HM Revenue & Customs admitted to Coindesk that they do have the power to request certain information from these exchanges. 

“These exchanges can retain information on their clients and the transactions that they have completed. These transactions may result in potential tax charges and HMRC has the power to issue notices requiring exchanges to provide this information.”

IRS also on the hunt

As cryptocurrencies have become more mainstream, and the regulators have caught up, so the tax authorities have noticed there is a hole to plug in regards to cryptocurrency? earnings. 

With the British Tax authority looking to garner information on cryptocurrency? users, so the USA’s IRS have already begun their work.

The IRS has already sent out thousands of warning letters to individuals it feels have participated in cryptocurrency? trading without reporting it to the tax authority.

“Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties,” IRS Commissioner Chuck Rettig said. “The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the law and helping taxpayers fully understand and meet their obligations.”