The UK’s tax and customs authorities will begin demanding information on holdings in cryptocurrency for taxpayers that it investigates for tax evasion and avoidance, according to a national accountancy group.
UHY Hacker Young said HMRC’s ‘statement of assets’ form, used when demanding a complete account of all of a taxpayer’s assets, will now include explicit demands for information on cryptocurrencies and other assets including those often used by organised crime.
Assets that will fall under the new policy will include mainstream cryptocurrencies such as Bitcoin and Ethereum but also less well-known assets such as Black Market Pesos, a system commonly used by Mexican and Colombian drug cartels to convert drug sale revenues in the US and Europe to local currencies, Hundi, an Indian system of credit notes, Fei ch’ien, a trust-based money transfer system commonly used in China’s hidden financial system, and assets found in electronic money wallets such as PayPal.
UHY said there has been “Increasing concern” at HMRC that tax authorities have not been able to identify crypto assets used by tax evaders, with the new declaration rules a step forward in remedying the issue.
“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”, UHY Hacker Young director David Jones said in a statement.
“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”, he added.