HMRC contacts just 0.4 per cent of UK crypto holders about tax rules
HM Revenue & Customs contacted just 0.4 per cent of the estimated 2.3m crypto holders in the UK about owing tax on their investments.
UK investors struggling with the headache of crypto taxes were given scarce help from the taxman which sent out just 8,329 letters to digital asset holders about potential capital gains tax bills last year, according to a Freedom of Information request by Quilter.
HMRC said it was planning to send out nudge letters to crypto holders in October 2021 to remind them to pay taxes on their capital gains from digital assets.
“Considering the significant interest in cryptoassests from the general public over the past few years its surprising to see that only 8,329 people in the UK have been sent a letter asking them to review how much CGT they might owe,” commented Shaun Moore, a tax and financial planning expert at Quilter.
Moore said that as cooperation and information sharing between crypto exchanges and the tax authority increases HMRC should be able to identify more people who are required to pay capital gains tax.
“The increase in popularity in these high-risk investments is somewhat understandable as people are looking for ways to grow their money quickly at a time when they can only get meagre rates on their savings in the bank which is all the time being eaten away at by inflation,” Moore added.
“We want to help people get their tax affairs right and nudge letters one of the ways we do this. Awareness raising letters are not sent to all taxpayers, but to those who we have reason to believe would most benefit from additional information,” a spokesperson for HMRC told Morning Wire.
“Our guidance is regularly updated, and our letter asks cryptoasset holders to review their transactions in light of this guidance to ensure that they are declared correctly,” the spokesperson added.
This year, HMRC issued fresh guidance on crypto taxes including a report clarifying that tokens lent and staked on decentralized finance protocols are treated as a disposal and subject to capital gains tax.
The tax authority has also beefed up its efforts to pursue criminals using digital assets, such as NFTs, for tax evasion. Three NFTs were seized by UK tax authorities in February 2022 and has opened a further 20 investigations into crypto assets, such as Bitcoin, as it increases its defences against a wave of crime.
Read more: UK taxman issues warning to crypto criminals