Cryptoassets: HMRC Enquiries and Interventions

Introduction

For many, cryptocurrency will be more associated with non-compliance than it is for compliance with the tax rules! This is unfortunate.

Thankfully, the market has moved on as it has evolved and the majority of people in the industry will be aware of their tax reporting obligations. That said, there will still be those who have failed to meet their obligations.

How does HMRC winkle out these crypto-miscreants and how can accountants assist (with the compliance, not the non-compliance!)?

Disclosure facilities

It is worth noting that there are no specific disclosure facilities or amnesties targeted at cryptoassets; nor have there been in the past.

As such, where a taxpayer has not disclosed income or gains from his or her cryptoassets then it might be appropriate to consider making a disclosure to HMRC using the digital disclosure facility (DDF).

Enquiries

General

Taxpayers with cryptoassets will be subject to the normal enquiry provisions as follows:found:

• for individuals, at TMA 1970, s. 9;
• for partnerships, at TMA 1970, s. 12AC; and
• for companies, at FA 1998, s. 24.

Individuals

Of course, under s. 9, HMRC will usually be subject to a strict time limit within which to open an enquiry.

This is generally 12 months from the date on which the tax return is delivered to HMRC. However, if the return is delivered late then the window is 12 months from the end of the quarter date in which it is eventually delivered.

Partnerships

The time limits, under s. 12AC, are the same as for individuals.

Companies

The enquiry procedure is similar to that above, with HMRC having 12 months from the date on which the tax return was delivered or, if delivered late, 12 months from the relevant quarter date.

Discovery assessments

Beyond the enquiry window, HMRC will also have an opportunity to re-open a taxpayer’s tax returns many years later under the rules for discovery assessments.

HMRC may raise a discovery assessment under TMA 1970, s. 29. For more details on discovery assessments generally please see our Signpost.

The usual time limit for HMRC to raise a discovery is four years from the end of the year of assessment in question (TMA 1970, s. 34(1)). This extended to six years where the tax deficiency is brought about by careless behaviour (s. 36(1)).

The time limit may be further extended to 20 years where the deficiencies are brought about by:

• deliberate conduct;
• a failure by the taxpayer to notify chargeability to tax; or
• a failure to notify HMRC about the use of a tax avoidance scheme that ought to have been notified and that brought about the deficiency.

For further information on cryptoassets, HMRC enquiries, disclosures or discovery assessments then please get in touch.