HMRC to demand crypto holdings data from taxpayers under investigation

HMRC is set to start collecting data on cryptocurrency holdings from taxpayers it suspects of tax evasion and avoidance, according to UHY Hacker Young.

The chartered accountants group claimed that HMRC’s ‘statement of assets’ form – which is used to demand a complete accounting of all a taxpayer’s assets in an investigation – will now include explicit demands for information on cryptos, as well as other other assets commonly used by organised crime.

UHY Hacker Young suggested there has been “increasing concern” at HMRC in recent years that it has not been able to identify cryptoassets used by tax evaders.

The information required by HMRC would include details on cryptoassets such as Bitcoin and Ethereum, as well as other assets in in ‘value transfer’ systems such as Black Market Pesos, a system allegedly used by Mexican and Colombian drug cartels; Hundi, an Indian system of credit notes; and Fei ch’ien, which is a trust-based money transfer system used in China’s hidden financial system.

Those who are found to have lied to HMRC about their assets can expect to be prosecuted, as HMRC’s new demand for data attempts to get to grips with the problem.

UHY Hacker Young director, David Jones, commented: “HMRC suspects that an increasing amount of hidden wealth is slipping through its fingers thanks to the rise of cryptocurrencies and other unsanctioned money transfer systems. This demand for information is an important step in HMRC’s fightback against that.

“The initiative comes hand in hand with HMRC’s publication of its new Cryptoassets Manual. A defence of ignorance of the law in this booming sector will no longer wash with the taxman.

“Some assets like Black Market Pesos are almost exclusively used by organised crime but criminal proceeds flow through relatively mainstream assets like Bitcoin at a rate that some find alarming. For example, cybercriminals overseas take virtually all of their ransom payments in Bitcoin to avoid detection.

“While criminals can still choose to not declare these assets, doing so gives HMRC another opportunity to bring criminal charges against them if their forensic work finds a hidden Bitcoin wallet.”

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