Cryptoassets, Renewed HMRC Focus
Crypto-assets have been the focus of a recent HMRC ‘one-to-many’ campaign. It was also confirmed earlier in the year that the 2024/2025 self-assessment tax return will include questions (on the capital gains pages) that relate to transactions in crypto-assets.
The view of HMRC is that there is a lack of awareness among taxpayers about their reporting requirements. Gains and losses from investments made in crypto-assets, such as Bitcoin or Ethereum, are not being reported correctly.
Most individual investors will be undertaking a transaction that falls within the scope of capital gains tax when they buy or sell a cryptoasset. The pooling and ‘bed and breakfast’ rules that apply to the disposal of company shares will also apply to cryptoassets. With the reduction in the annual exemption to £3,000 from 6 April 2024, investors could find that they have capital gains tax to pay in 2024/2025 at a rate of 10% or 18% on cryptoasset gains.
It should be noted that investors who meet the ‘badges of trade’ tests or who are actively mining cryptoassets will be regarded as undertaking a trading activity. Profits or losses arising on their activities will fall within the scope of income tax.
Given HMRC’s continuing interest in the world of cryptoassets, investors would be well advised to keep good records and to make sure that they are reporting their activities to HMRC. Otherwise, a HMRC review or enquiry could be just around the corner.
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