Bitcoin stored on exchanges in the United Kingdom may soon be subject to collection by tax officials
Companies that fail to pay their cryptocurrency taxes might have their cryptocurrency assets seized under new legislation proposed by HM Revenue and Customs (HMRC).
To better prepare for tax collection in the digital age, the government is now debating proposals that would provide the tax office access to digital wallets.
HMRC already has the authority to confiscate cash from bank accounts when tax obligations are not paid and the taxpayer falls under “direct recovery of debts” laws. But the company is considering extending it to accept payments from services like PayPal.
If the use of virtual currencies as a means of making online payments grows popular, the HMRC suggests in a consultation document that this may include the cryptocurrency wallets of corporations.
For many, the prospect of having their Bitcoin stolen from their wallets represents the next “crackdown” on an industry that has been blamed for supporting criminal activity and money laundering. The usage of decentralized cryptocurrencies like Bitcoin has been advocated as a way for people to take charge of their financial futures independently of governments.
Regulations may apply to cryptocurrencies kept on centralized online exchanges like Coinbase, Binance, and Kraken, but not to private cryptocurrency wallets owned by individual users.
Law enforcement agencies may now seize Bitcoin from these exchanges and hold it as evidence when they discover wrongdoing.
According to the HMRC’s consultation paper, bitcoin wallets might grow in popularity if more regulation is introduced surrounding digital currencies.
In a statement, HMRC noted: The Government will use the feedback from this consultation to do further research and public outreach on the ideas. To ensure that all of HMRC’s authority is used fairly and consistently, checks and balances have been included in the system.
Based on their recent pronouncements, HMRC seems to be planning to include cryptocurrencies in self-assessment tax filings. Experts in finance have estimated that this would add £10 million per year in capital gains taxes on top of what is already being paid on undisclosed income.
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