Crypto investors warned to disclose unpaid tax

HMRC has given crypto investors the opportunity to voluntarily disclose unpaid tax going back four years on their cryptocurrency and non-fungible token (NFT) transactions

As well as paying the tax for any years in question, penalties and interest will be charged on all unpaid tax.

HMRC has provided a penalty calculator so people can calculate the amount of interest owed and work out any penalties accumulated from the years of not paying tax on these assets.

Disclosures can be made online and crypto and non-fungible token (NFT) transactions will have to be included as a separate item on self assessment tax returns for the first time in the 2024-25 tax year.

HMRC said: ‘When we check your disclosure, we will consider if the penalty you’ve applied is fair — there’s a space on the disclosure form where you can give an explanation to help us reach our decision.

‘We may need to contact you if you do not give an explanation. If we think the penalty you’ve applied is too low, we may carry out a further check of your tax affairs.’

After declaring any overdue tax or charges owed, these must be paid within 30 days or HMRC will ‘take steps to recover the money’.

Some specific information is needed to calculate the exact amount owed such as the number of transactions made, number of years to disclose, exact exchanges used and whether a commercial calculator was used, as well as other personal information such as a national insurance number.

Taxpayers will also have to disclose the reason why the tax was not paid in full with three possible answers. These include ‘despite taking reasonable care’, ‘because you did not take care’ and ‘because it was something you did deliberately’. If reasonable care was taken, then the owed amount must go back four years.

If care was not taken, six years of what is owed to HMRC must be paid and if deliberate action was taken to mislead HMRC then payment for a maximum of 20 years must be paid.

Once the disclosure is made HMRC will make contact within 15 days with a payment reference number, then payment must be made. Checks will be made on the information and any discrepancies could incur further penalty charges.

If the full amount cannot be paid in full then HMRC will want to know how and when the payment will be made, your income and all monthly outgoings, and any assets held such as properties and vehicles.

At Budget 2023 HMRC announced that there would be greater scrutiny on the reporting of all crypto transactions, including for cryptocurrencies and non fungible tokens (NFTs).

See: Tell HMRC about unpaid tax on cryptoassets

Looking for advice? Check out our full range of services. From payroll help to taxation advice, our expert team is available to lend a hand.