In a move that reflects the evolving nature of the digital currencies landscape, the UK government is revising its approach to taxation on crypto assets. As part of this, there will be a structured process to report and pay any unpaid tax, crypto gains, or undeclared income from past years.
The update, which was outlined in HM Revenue & Customs’ latest publication, published specific guidelines for individuals and entities dealing with crypto assets like exchange tokens, NFTs (non-fungible tokens), and utility tokens.
One critical aspect of the revised policy is the requirement for taxpayers to have a government gateway user ID to initiate the disclosure. This would require detailed information such as a National Insurance Number, transaction details, and financial figures.
The steps to determine the extent of unpaid taxes will be influenced by the level of care exercised by the taxpayers in their tax affairs. The reporting duration can range from four years for those who demonstrated “reasonable care” to twenty years for those who “deliberately misled HMRC.”
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Taxpayers are required to settle the total amount owed within 30 days of making their disclosure to HMRC. Failure to comply with this strict deadline can result in penalties, including interest charges.
The HMRC has said that taxpayers in digital assets may be liable to pay CGT, which could include selling tokens, exchanging them for different digital assets, using token transactions, or giving them to someone other than a spouse or civil partner.
The implementation of this revised approach aligns with the broader global trend of regulatory bodies seeking to establish explicit tax norms for digital assets. The move signals the government’s determination to bring cryptocurrency transactions within the ambit of mainstream taxation and ensure the financial accountability of individuals and entities operating in the crypto sector.
