New figures published this week show a 432% increase in the amount of tax HMRC believes wealthy individuals underpaid on their cryptocurrency investments, says Pinsent Masons, the international law firm.
HMRC identified £2,280,000 in suspected underpaid tax relating to crypto assets in 2021-22, up from £428,000 the previous year.
Pinsent Masons says despite the recent cryptocurrency crash substantially reducing gains for many investors, HMRC will likely continue to keep an eye out for wealthy individuals it suspects of evading tax.
Some of the areas in which HMRC identified the largest amounts of potential unpaid tax by wealthy individuals include:
- Capital Gains Tax with £542,800,000 believed to have been underpaid
- Inheritance Tax with £328,690,000 believed to have been underpaid
Steven Porter, Partner at Pinsent Masons says: “HMRC has made it a priority to identify suspect crypto assets. As the asset class has grown rapidly in popularity, it has come under greater scrutiny from the taxman.”
“The seizure earlier this year of NFTs by HMRC should sound alarm bells for those who think that they can get away with evading tax.”
“HMRC is rapidly improving how it tracks down and traces crypto assets. Its methods of identifying tax evasion are likely to become more sophisticated.”
“We would expect to see greater co-operation from overseas tax authorities, meaning wealthy crypto investors could find it more difficult to hide their assets off-shore.”
* Tax under consideration from the Wealthy and Mid-Sized Business Directorate – year-end March 31 2022. Tax under consideration is an estimate of the maximum potential additional tax liability across all enquiries, before full investigations have been completed