Understanding HMRC’s Crypto Disclosure Facility: A Guide for Individuals with Undisclosed Tax
In recent years, the emergence of cryptocurrencies has led to a surge in investment opportunities. However, the complexities surrounding the taxation of crypto assets have left many individuals unsure about their tax obligations, with some unaware of how to calculate profits and the requirement to disclose to HMRC. HM Revenue & Customs (HMRC) has now introduced a Crypto Disclosure Facility (CDF) to address this issue, aiming to assist those with undisclosed tax liabilities related to cryptoassets.
What is the Crypto Disclosure Facility?
HMRC’s CDF is a mechanism designed to enable individuals who hold cryptoassets and have undisclosed tax liabilities to voluntarily disclose their previously undeclared income or gains. It allows taxpayers to come forward and regularize their tax affairs regarding crypto assets, ensuring compliance with UK tax laws.
See Tell HMRC about unpaid tax on cryptoassets – GOV.UK (www.gov.uk)
Who Needs to Use the CDF?
Individuals who have earned income (through mining or staking or as payment for services) or realized gains from crypto-related activities (through disposals, both crypto to cash and crypto to crypto, including depositing to some protocols), may be obligated to report and pay taxes on these activities. Failure to do so may result in penalties or legal consequences.
Steps to Utilize the CDF:
1. Identification of Tax Liabilities: The first step is to assess whether there are undisclosed tax liabilities related to cryptoassets. This involves reviewing all crypto transactions and calculating any unpaid taxes.
2. Registration and Disclosure: Using HMRC’s online services, individuals can register for the CDF and make a disclosure of their undisclosed tax liabilities from crypto activities. This should include accurate and detailed information about the transactions.
3. Payment of Tax and Penalties: Upon disclosure, individuals are required to settle the outstanding tax liabilities, which may include income tax, capital gains tax, interest, and potential penalties. Payment plans might be available based on individual circumstances.
How a Specialist Crypto Tax Advisor Can Help:
As a specialist crypto tax advisor, we provide invaluable assistance to individuals navigating the complexities of crypto-related tax obligations and HMRC’s CDF:
1. Assessment and Analysis. We conduct a thorough assessment of your crypto transactions to determine any undisclosed tax liabilities accurately. We have years of practical experience in both the crypto world and providing crypto solutions for clients.
2. Guidance through the CDF Process: Our expertise guides you through the entire process of registering for the CDF, making a comprehensive disclosure, and ensuring compliance with HMRC’s requirements.
3. Optimisation of Tax Settlement: We strive to minimize tax liabilities where possible by leveraging our knowledge of tax laws and available reliefs or deductions applicable to cryptoassets.
4. Negotiation and Resolution: In cases where penalties or interest are incurred, we negotiate with HMRC on your behalf to seek favorable resolutions and payment plans, aiming to mitigate financial repercussions.
5. Ongoing Compliance Support: Beyond the disclosure, we offer ongoing support and advice to ensure continued compliance with evolving tax regulations concerning cryptocurrencies.
HMRC’s Crypto Disclosure Facility offers a chance for individuals with undisclosed tax liabilities related to cryptoassets to rectify their tax affairs. Partnering with a specialized crypto tax advisor can streamline this process, providing expert guidance and ensuring a smooth and compliant disclosure while striving to minimize financial impact. Taking proactive steps to address undisclosed tax liabilities not only mitigates risks but also fosters a transparent and responsible approach to taxation within the burgeoning crypto space.
Why Fusion Partners
Fusion Partners is a boutique consultancy providing specialist tax advice and estate planning advice. The founder, Anthony Rogers, is a crypto fanatic, with personal and professional experience in most areas of the crypto space. However, he is also a Chartered Tax Advisor with nearly 20 years of specialist tax experience, including crypto enquiries and disclosures.
Contact us: info@fusionpartners.co.uk