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HMRC contacts crypto investors as banks report suspicious activity

Legal

www.thecoinrepublic.com 27 December 2021 03:14, UTC
  
Reading time: ~2 m

Crypto has become mainstream this year. As the world has identified the true potential of digital assets, a flood of participants have been observed entering. Many investors are making notable gains. Several altcoins have also made their investors billionaires. However, following the scenario, several banks are getting suspicious following a substantial boost in its clients’ accounts. Banks have reported such activities to HM Revenue and Customs (HMRC). And now the HMRC is contacting inventors who have made huge gains in the crypto market.

Crypto helps investors make passive gains

The crypto ecosystem has been in trend for the last few years due to notable gains. The industry is getting mainstream and witnesses wide use due to its decentralized nature. According to several optimistic players in the industry, cryptocurrencies have the potential to disrupt our current banking infrastructure.

Following the cryptocurrency payments system, Patrick Cannon, one of the UK’s leading tax barristers, observed how HMRC is reacting to the development of the space. According to Cannon, in terms of HMRC, they are very aware of the gains individuals have made over the past five to six years.

HMRC wants individuals to report their gains

According to Cannon, the HMRC is eager that individuals should be reporting gains and have been using their information gathering powers to do so. The tax authority is planning to acquire reports from exchange platforms like Coinbase, that contain users’ details and their holdings.

The UK tax authority is also receiving reports from banks of suspicious activity where clients suddenly come with large sums through selling BTC and other assets. These mainstream banks report the accounts to HMRC who then sends a letter to the taxpayer concerning after a check of these recent tax returns. The scenario suggests that such gains being made through crypto gains have never been reported.

How HMRC views cryptocurrencies?

Referring to the way how HMRC is levying digital assets as controversial, it seems the authority sees crypto as an asset. Indeed, the tax authority does not seem to consider digital currencies as a means of exchange. 

According to Cannon, it is significant to keep public records, as the tax authority regards most people as investing in crypto rather than trading as investors. Moreover, the authority is viewing the gains arising from the sale of these assets as subject to Capital Gains Tax. Notably, Capital Gains Tax is only applied if cryptocurrencies are not being considered as currency.


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