Her Majesty’s Revenue and Customs (HMRC), the tax offices of the UK has requested reports of all operations of local cryptocurrencies and its traders in order to verify tax compliance.
The HMRC has sent notices to three exchanges in the last week – Coinbase, eToro and CEX.IO, requesting them to inform the regulator about users’ transactions in order to identify tax evasion.
A guide, containing details of the taxation process on crypto trading was published by HMRC some time back, however those about its latest efforts have been kept under the wraps for now “since disclosing them could jeopardize the assessment or collection of tax,”.
It is likely that HMRC will ask for details for the last few years as part of the first round of investigations:
“HMRC is looking to work with exchanges when it comes to finding information on people who have been buying and selling crypto. I think they will only go back a couple of years, two or three years.”
The HMRC treats digital assets as property rather than as forms of money. Due to this, cryptocurrency investors may owe corporation tax, income tax, or capital gains tax depending on their activities and transactions type.
Several tax authorities around the world seem to have shifted their focus towards crypto exchanges. Recently, the US Internal Revenue Service (IRS) warned taxpayers who might have failed to report income and pay the resulting tax from cryptocurrency transactions which could result in stiff penalties.
US-based crypto exchange Coinbase, had to hand over their customer database to the US authorities last year under a federal court order.
The tax authority of Brazil aims to get data from these trading intermediaries. The new regulations will come into force in September 2019, after which, the tax office will be able to solicit information on customers who are suspected of tax evasion.
With growing interests in the crypto world, the increased regulations and tax policies should not come as a surprise to investors.