HMRC sends ‘nudge letters’ to crypto investors

According to the Chartered Institute of Taxation (CIOT), HMRC has ‘sent nudge’ letters to crypto investors it suspects have failed to pay the correct tax on their gains.

Many crypto investors are unaware of their tax obligations due to uncertainty over tax rules and limited understanding of the nature of crypto assets.

Chargeable disposal occurs when an individual:

• Sells crypto assets for fiat currency.
• Exchanges one crypto asset for another.
• Uses crypto assets to buy goods or services.
• Gives away crypto assets to someone other than the spouse or civil partner (in this instance, the individual is deemed to receive the asset’s value even if they do not receive anything).

Gary Ashford, Chair of the CIOT’s Crypto Assets Working Group, said:

‘Many investors may be unaware that profits from crypto assets are subject to income tax or Capital Gains Tax (CGT) like any other asset, depending on how they’re held.

‘If you receive a ‘nudge letter’ from HMRC, it’s essential to take it seriously. Even those who don’t receive a letter should review their crypto activity, file a tax return, or use the capital gains real-time transaction service if necessary.

‘Sometimes tax can be due even where the investor does not think his or her investments have been profitable. Selling, lending or ‘staking’ crypto assets – or potentially even transferring assets between crypto sites and portfolios – will usually trigger a disposal in the tax year in question.’

Internet links: CIOT