I don’t know whether it is just me being sensitive, but there seems to be a view in some parts that profits on crypto currency and similar cyber things are not taxable. The reasoning would appear to be that because they are impossible to access by anybody other than the person who knows the relevant string of characters, it is impossible for HMRC to tax them. Er, think again.
Crypto assets (and things like Non Fungible Tokens) are property under English law – recently confirmed by the Property (Digital Assets etc.) Act 2025 – and are within the scope of UK tax. This act is not a large document. It has only one operative section, (unsurprisingly referred to as ‘Section 1’), which states:
‘A thing (including a thing that is digital or electronic in nature) is not prevented from being the object of personal property rights merely because it is neither—
(a) a thing in possession, nor
(b) a thing in action.’
That’s it. A bit odd really – all this ‘thing’ stuff. I wonder what it is going to cover – it could be anything I suppose, which may be the whole idea.
HMRC are making serious efforts to collect information about crypto transactions with a series of reporting and disclosure requirements. And there is something called the OECD Crypto Asset Reporting Framework which requires service providers to collect and report all sorts of information. So they are all going to come to light, sooner or later.
HMRC have introduced a crypto assets section in the CGT section of tax returns and also confirm that they should be shown in box 76 of the IHT400.
An interesting question is where the crypto asset is actually situated because it has no physical existence – it is in the cloud somewhere. HMRC take the view that the situs is determined by the residence of the beneficial owner. Where the crypto asset is effectively an interest in an underlying asset then the location of that asset will be the situs of the crypto asset for tax purposes.
This is really difficult, but the HMRC view seems reasonable under the circumstances – although it remains to be seen whether their view will be supported by the courts in due course.
The increasing publicity given to this subject by HMRC is going to make it very difficult for anybody to claim that they did not know (or had a reasonable excuse) when a penalty for non-compliance arises.
Not wishing to be too pessimistic, it has always seemed to me that there is a serious risk of somebody hacking into my computer and transferring my crypto assets to foreign parts with no trail or evidence. Just imagine, opening your crypto wallet and instead of seeing a comforting £10,000,000, it just says £000,000. It would ruin your breakfast.
I wonder whether in these circumstances HMRC would give me relief for my loss – and how I would prove it.
I don’t know whether it is just me being sensitive, but there seems to be a view in some parts that profits on crypto currency and similar cyber things are not taxable. The reasoning would appear to be that because they are impossible to access by anybody other than the person who knows the relevant string of characters, it is impossible for HMRC to tax them. Er, think again.
Crypto assets (and things like Non Fungible Tokens) are property under English law – recently confirmed by the Property (Digital Assets etc.) Act 2025 – and are within the scope of UK tax. This act is not a large document. It has only one operative section, (unsurprisingly referred to as ‘Section 1’), which states:
‘A thing (including a thing that is digital or electronic in nature) is not prevented from being the object of personal property rights merely because it is neither—
(a) a thing in possession, nor
(b) a thing in action.’
That’s it. A bit odd really – all this ‘thing’ stuff. I wonder what it is going to cover – it could be anything I suppose, which may be the whole idea.
HMRC are making serious efforts to collect information about crypto transactions with a series of reporting and disclosure requirements. And there is something called the OECD Crypto Asset Reporting Framework which requires service providers to collect and report all sorts of information. So they are all going to come to light, sooner or later.
HMRC have introduced a crypto assets section in the CGT section of tax returns and also confirm that they should be shown in box 76 of the IHT400.
An interesting question is where the crypto asset is actually situated because it has no physical existence – it is in the cloud somewhere. HMRC take the view that the situs is determined by the residence of the beneficial owner. Where the crypto asset is effectively an interest in an underlying asset then the location of that asset will be the situs of the crypto asset for tax purposes.
This is really difficult, but the HMRC view seems reasonable under the circumstances – although it remains to be seen whether their view will be supported by the courts in due course.
The increasing publicity given to this subject by HMRC is going to make it very difficult for anybody to claim that they did not know (or had a reasonable excuse) when a penalty for non-compliance arises.
Not wishing to be too pessimistic, it has always seemed to me that there is a serious risk of somebody hacking into my computer and transferring my crypto assets to foreign parts with no trail or evidence. Just imagine, opening your crypto wallet and instead of seeing a comforting £10,000,000, it just says £000,000. It would ruin your breakfast.
I wonder whether in these circumstances HMRC would give me relief for my loss – and how I would prove it.
