Ex Tax Inspector Amit Puri Confirms HMRC Has Written To Over 100,000 About Crypto Tax Disclosures

HMRC Has Written To Over 100,000 About Crypto Tax Disclosures

Pure Tax Investigations highlight that HMRC have more than doubled the number of people they wrote out to about cryptoasset gains in 2024-25, to 65,000.

Who is exposed to Crypto Tax?

HMRC know a great many investors in cryptoassets have failed to report their crypto tax related gains. While most have likely not returned anything to HMRC, others have failed to recognise that changing from one type cryptoasset to another is also a chargeable disposal for tax purposes. The problem is exacerbated as investors often use international crypto trading platforms too, which are not required to share information with HMRC yet. Most readers will recognise that the crypto investment market attracted so many people given their intangible and informal nature, the investment/exchange platforms and previous periods of exponential growth witnessed by investors.

Beware though, despite the activities feeling like mere speculation, as if one were gambling (which is not a taxable activity), the selling and exchanging of cryptoassets is taxable.

See HMRC’s published guidance here.

What can one do to correct historic errors?

After publishing various guidance over the last decade to raise awareness, HMRC launched a new crypto tax disclosure facility at the end of 2023 for those with historic tax errors to correct. From experience, disclosure facilities offer the most favourable treatment and approach from HMRC, especially for someone who makes a wholly unprompted / voluntary disclosure. In many cases there should not be any penalties at all and in others they may technically be payable, but we typically help clients suspend those indefinitely.

What has HMRC done to find cryptoassets investors?

Before the introduction of the crypto tax disclosure facility HMRC had already warned people that it was gearing up to crackdown on tax abuse related to cryptoassets. Since then they have been busy-

First, HMRC has been approaching cryptoasset platforms directly for records on UK resident clients, to pursue them (using their one-to-many letters, to better utilise their resources). It has been successful in that endeavour, uncovering swathes of investment clients’ information, which has led HMRC to sending the tens of thousands of “nudge letters” to people who they suspected owed UK taxes on their cryptoassets.

Secondly, the UK government confirmed their commitment to the new international reporting framework (known as the Crypto Asset Reporting Framework (“CARF”)), which will see comprehensive information regarding investors and their cryptoassets being collected from 1 January 2026 and automatically being shared with HMRC. This includes most investment/exchange platforms overseas too!

Therefore it goes without say that investors ought to consider the downside of waiting for HMRC to find and write to them, because the crypto tax disclosure facility provides protection from enquiries and serious investigations, and from financial penalties as well as public naming and shaming.

Tell me more about the Crypto Tax Disclosure Facility

One should not be waiting for HMRC to write to them, prompting a disclosure out of fear of knowing that HMRC are now armed with financial information. That is likely to cost more overall, and investors could even find themselves liable to penalties for deliberate actions / dishonesty, which brings with it the possibility of being named and shamed publicly too.

This streamlined facility is for investors (primarily, but those trading in cryptoassets too) who have not reported their sales and exchanges, i.e. those transactions that were reportable on their self-assessment tax returns.

Have HMRC written to many people about Cryptoassets?

Amit asked HMRC to share the number of compliance checks and more serious investigations conducted concerning cryptoassets, but HMRC declined on the basis of costs in retrieving that data. HMRC confirmed that, “Compliance work involving cryptoassets could be undertaken by various teams across HMRC’s Customer Compliance Group dependent upon the nature and complexity of the enquiry. On internal systems, enquiries are categorised according to the primary risk identified. While some cases may involve cryptoassets, this is not always the lead risk. We are therefore unable to provide an answer to these questions without manually reviewing thousands of enquiries, which would exceed the cost limit.”

HMRC did however confirm the number of one-to-many informal letters / emails sent out, designed to prompt recipients in to checking their affairs to ensure they are compliant. Including making tax disclosures where errors are identified.

Year            Total number of “nudge letters” issued
2020/21    0
2021/22    8,329
2022/23    0
2023/24    27,713
2024/25    64,982

Serious investigations – Crypto Tax Fraud

These civil investigations are time intensive and resource hungry, but are likely to be necessary to combat Crypto Tax Fraud. HMRC’s Fraud Investigation Service (FIS) investigators manage these, and have more time, give more attention, and are experienced. Remember, HMRC are seeking a recovery of taxes usually, late payment interest, and typically large penalties, for failing to submit correct tax returns or failing to notify HMRC that taxes were payable in the first place. Allegations of having acted deliberately or dishonestly can be common and HMRC are seeking to publicly name and shame people too.

Code of Practice 9

A Code of Practice 9, or COP9, is a civil investigation of suspected tax fraud, where taxpayers are explicitly accused of having acted dishonestly/with fraudulent intent. Taxpayers are given an opportunity to admit (at a high-level) tax fraud within 60 days in return for being able to make disclosures in much more detail later.

Taxpayers must disclose the background and reasons for their deliberate actions, compute the additional income, profits, gains, taxes, and late payment interest and penalties—all at their own cost. HMRC expects taxpayers to commission comprehensive disclosure reports—usually prepared by suitably experienced tax investigations specialists. In return, lengthy, in-depth, and intrusive investigations by HMRC are avoided, which can otherwise run on for many years. Crypto Tax Fraud should not be buried until caught; this facility encourages investors to to come clean and co-operate, bringing with it several benefits.

Code of Practice 8

A Code of Practice 8, COP8, is a civil investigation into large amounts of tax at risk, but not necessarily due to tax fraud—but it can include that too. It’s not unusual for these to be used against marketed avoidance schemes or arrangements and bespoke tax planning, where HMRC is likely to have made a discovery about historic tax risks. Crypto Tax Fraud is being tackled through COP8 too, which shows HMRC / FIS is not taking crypto tax omissions lightly.

The investigators are well prepared to argue they have identified new information and culpability— also triggering penalties. There is little possibility of dissuading them in favour of a COP9-style disclosure report and also typically some span years due to their in-depth nature.

They’re both carried out by HMRC’s FIS. They’re not routine HMRC compliance checks which are carried out into a single tax year or accounting period. FIS may approach third parties for information too which is common in Crypto Tax cases. Typically they consider and assess several prior years or periods, by claiming they have made “discoveries”. FIS investigators tend to identify and challenge “careless” and “deliberate” actions which support their reasons for looking at older periods, and so habitually go beyond the normal four years assessing-limit.

PLEASE SEE THE FULL ARTICLE HERE: https://www.einpresswire.com/article/857909640/ex-tax-inspector-amit-puri-confirms-hmrc-has-written-to-over-100-000-about-crypto-tax-disclosures