- HMRC, the revenue authority of the United Kingdom has decided to increase efforts to uncover what it calls ‘’hidden wealth’’.
- The UK tax authority will include a new section in the ‘‘Statement of Assets” specifically designed for individuals to declare crypto assets.
- Any taxpayer who fails to disclose their capital gains could face a 20% tax charge on capital gains besides interests and penalties that may add up to 200% of any due taxes in addition to jail time.
In a bid to crack down on unlawful wealth concealed under the garb of “unsanctioned” currencies, the UK tax authority is planning to ramp up its efforts of snaring tax evaders. Her Majesty’s Revenue and Customs (HMRC), the revenue authority of the United Kingdom, has decided to expose what it calls “hidden wealth”, according to the UK accountancy group UHY Hacker Young.
The group has reported that the tax authority plans to introduce a new section in the “Statement of Assets” form used in tax evasion investigations, dealing specifically with cryptocurrencies, including Bitcoin (BTC) and Ether (ETH) among others.
Besides, the form will also reportedly now include sections on systems of exchange, covering the ‘black market’ peso used by Mexican and Colombian cartels. This would be over and above explicit demands for information on crypto and similar ‘unsanctioned currency’ holdings used in Africa, India, and China.
What is Behind the Move?
HMRC is under the impression that plenty of such hidden wealth is going unaccounted for, majorly because of the rise of cryptocurrencies and other unsanctioned money transfer methods. Therefore, there is an urgent need for gathering all information regarding such transactions to be able to boost HMRC’s fight against illegal wealth hoarding.
“A defense of ignorance of the law in this booming sector will no longer wash with the taxman,” said Director of UHY Hacker Young, David Jones. “While criminals can still choose not to declare assets, doing so gives HMRC another opportunity to bring criminal charges against them if their forensic work finds a hidden Bitcoin wallet,” Jones added.
Though it is not very likely that the HMRC will be able to gain every information they seek on crypto holdings, it is still a step in the right direction. Traders might choose to avoid hefty penalties by disclosing their gains before being prompted. HMRC is seeking data for the period from April 2017 to April 2019, which saw the height of the market, bringing in enormous profits for cryptocurrency traders.
Stiff Penalties Awaiting Tax Evaders
Data collated by HMRC would be used to improve the integrity of the tax system and in the identification of those who have failed to declare their gains, according to a spokesperson for the agency. Under the new HMRC rules, any taxpayer who fails to disclose their gain could face a 20% capital gains tax charge besides interests and penalties of up to 200% of any due taxes. This is over and above criminal charges and jail terms.
It would be difficult for traders who have not maintained accurate records to avoid these penalties because they don’t realize the exchange is taxable. With the HMRC’s advance notice, there can be several changes in the landscape soon.