While the realm of crypto-assets might seem like a glimpse into the future, it still plays by the same rules as more conventional forms of finance.
As such, you are obligated to handle the reporting of your crypto-assets to stay compliant with HM Revenue and Customs.
Whether you have made gains, losses, or are generating an income from crypto-assets, these need to form part of your Self-Assessment.
What are the reporting requirements for crypto-assets?
Your crypto-assets are as prone to taxable events as with any other asset.
This includes using cryptocurrency to buy goods and services.
Where any gains exceed the £6,000 exemption, you may have to pay Capital Gains Tax.
The income generated from crypto-assets is likely to be fileable under miscellaneous income and will be listed under your additional income section when completing a Self-Assessment.
Every transaction must be recorded so that it can be accurately referred back to when you come to file your tax return.
You should reconcile your wallets to accurately determine the value of your crypto-assets to ensure that any tax is correctly apportioned.
Failure to maintain records could leave you noncompliant and may result in penalties or higher tax bills in the future.
There are specific requirements in place to prevent rapid disposal and reacquisition, generally with a 30-day buffer preventing this from being used as a means to artificially report a loss.
Why is it important to make accurate filings for crypto-assets?
The Government is aware of the possibilities for fraud introduced by crypto-assets.
As such, these avenues are often subject to enhanced scrutiny to prevent anyone from misfiling.
Similarly, given the novelty of crypto-assets, mistakes are inevitable when it comes to using an unfamiliar system.
There is a lenience for any careless errors, resulting in only a 30 per cent penalty.
However, if there are deliberate errors or concealed inaccuracies, then the penalty can range from 70 per cent to 100 per cent.
Interest may also be charged on these penalties, resulting in a costly expense for those who try to circumvent the rules.
Seeking professional advice is advisable when approaching a new financial venture, so that you can stay compliant with the current rules and with any future changes.
If you want to stay ahead and have greater control over your finances, then speak to our team today!
