The United Kingdom’s tax agency is on the hunt for cryptocurrency tax evaders.
Her Majesty’s Revenue and Customs (HMRC) has sent letters to at least three popular cryptocurrency exchanges operating in the U.K., requesting client transaction data. These advance notices, which have been mailed to eToro, Coinbase and CEX.IO, will serve as precursors to a later statutory letter which will require more definitive action, a representative for eToro told Bitcoin Magazine.
The representative also noted that “[t]here is still some clarification needed as to what information will be required and from whom” but that eToro, “as required by law,” plans to comply when it receives the statutory notice. It also plans to host a webinar with the HMRC on this topic in the coming week.
The U.K. managing director for eToro, Iqbal V. Gandham, told us that the advanced notice “comes as no surprise,” calling the taxation “the first step to bringing it in line with other investments [and] solidifying its position as an emerging asset class.” Gandham anticipates that clear regulations, which he believes will encourage adoption, are next.
“A lot of people got into crypto during the 2017/2018 boom,” Gandham said. “Many of these people were first-time investors, so it is important that these people are not scared by HMRC’s move. It’s an overused phrase, but there are two certainties in life: death and taxes. Crypto investors should not be put off by this development. The key is understanding how this affects you.”
He added that eToro has built a tax tool to ease this process for investors.
Similar Actions in the U.S.
These moves by HMRC mirror those by its counterpart across the pond. The IRS began sending letters to some 10,000 U.S. cryptocurrency investors in June 2019. These “soft notices,” divided into three categories, aren’t always consequential, as some recipients may have paid their taxes in full, though for those that haven’t, follow-up actions may ensue.
Back in 2016, the IRS invoked a John Doe summons on Coinbase to investigate tax evasion among some half a million users. The ensuing court battle, a win for the exchange, chiseled this figure down to some 13,000 users (basically anyone who had bought more than $20,000 worth of bitcoin between 2013 and 2015).