Her Majesty’s Revenue and Customs – the primary tax revenue service in the U.K. – recently sent letters to major crypto exchanges that operate in the country and are requesting an abundance of data aimed at identifying users who have attempted to avoid paying taxes on their cryptocurrency transactions.
This crackdown is most likely to impact those who are fairly new to the crypto industry, as sources claim that it is most plausible that the HMRC will collect 2-3 years’ worth of data.
Watch Out Crypto Investors, The Tax Man Is Coming
Taxes have long been an issue for the crypto markets, as tax authorities across the globe have struggled to gain a thorough understanding of how to effectively go about implementing taxes on the nascent markets.
Despite this, it does appear that major tax authorities are beginning to crack down on investors who may have avoided paying taxes on any crypto, as a recent report from Coindesk cites a source that claims that the HMRC is beginning to collect customer names and transaction data from some of the world’s largest crypto exchanges — including Coinbase, eToro, and CEX.IO.
“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,” a source told Coindesk.
The timing of the HMRC’s attempt to harvest taxes that may have gone unpaid from cryptocurrency investors coincides closely with the U.S. Internal Revenue Service’s letters sent to 10,000 investors reminding them to report their crypto transactions on their taxes.
Will Early Investors Be Safe from HMRC’s Tax Collection Efforts?
Ironically, the earliest crypto investors who have likely made the most from their investments may be safe from the HMRC’s efforts, as the unidentified source told Coindesk that the newest investors will be the ones who ultimately foot the bill due to the difficulty of collecting data from more than 3 years back.
“If they [the HMRC] do only go back two or three years, I think the interesting thing here is, that the individuals who went into crypto very early on in 2012-13 will not be affected,” the source explained.
Although it is unclear as to what impact a global tax-crackdown on the crypto industry may have on the markets, it is likely that the days of some investors freely avoiding taxes on capital gains made via cryptocurrencies are over.