Market leading insight for tax experts
View online issue

HMRC to contact wealthy investors

printer Mail

Figures published by HMRC show that £428m of tax on cryptoassets is ‘under consideration’ for the tax year 2020/21, up from £142m the previous year. ‘Tax under consideration’ is an estimate of the maximum potential additional tax liability before full investigation has been completed or, as HMRC puts it, ‘a snapshot of work in progress at a given point’.

Steven Porter, partner at Pinsent Masons commented: ‘HMRC’s ability to gather information on crypto holdings is seemingly still at an early stage but will no doubt increase, given the popularity of these assets. It seems likely that the next step will see HMRC increase international cooperation with overseas tax authorities to get more data from overseas cryptocurrency exchanges and brokers.’

HMRC’s Wealthy External Forum intends to write to the following groups of taxpayers to highlight the potential tax implications of certain income or gains:

  • Foreign tax credit double taxation allowance: HMRC will contact those who are understood to have received investment income, such as interest or dividends from overseas, during the tax year 2019/20, and have claimed relief for foreign taxes paid on that income but where HMRC believes the rate of relief claimed to be incorrect.
  • Cryptoassets: HMRC will write to taxpayers who have held cryptoassets, advising them of the potential tax implications and linking to relevant guidance. The letters will advise taxpayers that gains on cryptoassets are liable to CGT and highlight common types of disposal.

Gary Ashford, Partner at Harbottle & Lewis, said: ‘I expect to see more of this happening in the coming twelve months. HMRC has been using its extensive information powers to secure data on holders of crypto from crypto exchanges, and as we have seen in the past years in relationship to those holding undeclared offshore bank accounts, will start to challenge those whom they believe to be holding crypto and not declaring associated income or gains.

‘Separately, the current HMRC view that crypto situs is where the beneficial owner is resident, is a very significant issue for UK resident non-doms, who may believe the crypto is non UK situs and so non-taxable here.’

Pinsent Masons also noted other large increases in suspected underpaid tax by wealthy individuals, including:

  • CGT: £752m in 2020/21, up from £293m the year before; and
  • IHT: £353m last year, up from £247m.
Issue: 1552
Categories: News