HMRC launches new campaign to target unpaid tax on cryptoassets
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HMRC has launched a service to allow individuals to make a voluntary disclosure of any unpaid tax from income or gains from cryptoassets, such as exchange tokens, NFTs, and utility tokens. Although HMRC’s voluntary disclosure service is always available, this new announcement highlights their focus on cryptoassets and the suspected significant amount of unpaid tax.
Based on HMRC’s guidance, income and gains received in the form of cryptoassets are deemed to be remitted to the UK for individuals who are UK residents. These are subject to UK tax, even if the cryptocurrency is kept in a foreign exchange. As a result, for non-UK domiciled individuals, the potential tax savings under the remittance basis do not apply to cryptoassets.
The length of time for which you need to declare unpaid tax depends on the nature of the error:
- 4 years for errors made despite taking reasonable care
- 6 years if due to carelessness
- and up to 20 years for deliberate underpayment.
As part of the voluntary disclosure, HMRC asks individuals to work out the interest and penalties due. HMRC will assess whether the applied penalty is fair, based on the nature of the error.
Accurately and promptly addressing underpayment is critical for compliance and avoiding further complications. Given the complexities involved in dealing with cryptoassets, consulting a tax expert is advisable. If you have undeclared crypto income or gains, PKF is ready to help you accurately determine your tax liability and support you throughout the disclosure process.
If you would like to discuss, please contact Brenda Hu or Louise Fryer.