To fight tax evasion, UK’s tax, payments, and customs body, HMRC (Her Majesty’s Revenue and Customs) is lobbying for customer information from crypto exchange platforms. HMRC is reportedly requesting customers’ names and transaction details from virtual currency exchanges to identify tax evasion cases.
The tax authority seems not to slow down on its move to concentrate its magnifying glass over virtual currency exchange platforms twisting their hand to avail customer information for inspection purposes.
To show their seriousness and commitment to this cause, Her Majesty’s Revenue and Customs authority recently released a new policy paper that outlines its position on virtual currency taxation for individuals. Through the paper, the HMRC clarifies several policies that touch on capital gains and income taxation in the country.
The tax authority body defines three types of virtual assets:
- Security Tokens – These are virtual assets that represent a form of equity in a business
- Exchange Tokens – This is virtual currency or asset that takes the shape of Bitcoin
- Utility Tokens – Such counts for a virtual asset a firm issues with utility uses
The policy paper principles apply to all forms of virtual assets acknowledging the need to adopt different tax treatments for utility and security virtual assets.
According to HMRC, cryptocurrencies should not be treated as real money but should be treated as assets. The tax authority body recognizes the fact that many individuals hold virtual assets as personal investments where they need to comply with capital gains taxation guidelines when disposing of their crypto assets.
Individuals and entities are liable to comply with income tax regulations for virtual assets that are received through an airdrop, crypto mining, and confirmation rewards. Virtual assets that are acquired as payment from an employer also fall under this category. According to the new guidelines, income tax regulations are set to take precedence over capital gains in situations where individuals make a profit from trading virtual assets.
It is prudent to note that the report does not categorize the buying and selling of crypto assets the same as gambling.
Cryptocurrency Exchange Platforms Come Under Fire
According to reliable sources in the crypto space, it is believed that the tax authority has sent letters to some three major crypto exchange platforms in the UK. CEX.io, Coinbase, and eToro are reported to have received letters from the tax body requesting them to make available user and transaction information.
In a bid to catch those individuals who have been evading taxes. HMRC aims to foster a good working relationship with crypto exchange platforms. According to reliable sources, the tax authority wishes only to go back two or three years ago:
“It is prudent to note that if the tax body goes back only two or three years back, individuals who ventured into cryptocurrency in 2012 and 2013 will not be touched by the operation. Individuals who probably made the largest gains will not be affected; rather it’s people who ventured into cryptocurrency at the time where crypto was at its peak who will be affected.”
Her Majesty’s Revenue and Customs body are reportedly planning to conduct the operation competently disclosing to the media:
“Nobody should be alarmed by the operation. Crypto exchange platforms have the liberty to retain customer information regarding the transaction they have completed. Failure to submit this customer information may result in potential tax charges being issued considering HMRC has the powers to ask for client information from crypto exchange platforms.”
Late 2018, Her Majesty’s Revenue and Customs body published its first-ever comprehensive tax legislature for private crypto holders after a lengthy dialogue period. According to the authority, individuals are forced to adhere to either Income Tax or Capital Gains regulations depending on the type of virtual currency transaction they are involved.
It seems Britain is taking a similar stand as the US government where the Internal Revenue Service sent over 9,000 letters to crypto investors requesting them to amend their tax filings. In the process, some individuals were forced to pay the government back the taxes, penalties, or interest that they had forfeited.
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