Tax on crypto transactions

Janin1992

My first post.

I think but I am not sure that I underpaid a significant amount of income tax for last 2 years. I checked HMRC guidance on taxation of income from cryptocurrencies. But my case is not covered. This is why I am not sure if I underpaid or not.

The income is around 70K per year. I actually did not have this "income" as a cash as I never converted crypto into cash. So when I started to read the guidance I was horrified to discover that I possibly have to pay a lot of income tax for previous years.

What advice would you give? I was thinking of making a declaration to HMRC that I did not pay enough tax for 2017-2018, and adjust declaration fro 2018-2019 (I think I still have 10 days left to make an adjustment).
How do I find a reputable accountant that could help me to solve this mess?

Jeremy535897

Before you panic, almost no individual is treated as trading in cryptocurrencies or other investments. You normally only pay tax (capital gains tax) on cryptocurrency when you convert it into something else, unless you receive it as part of your remuneration for employment, when it is subject to income tax on receipt.

I checked HMRC guidance on taxation of income from cryptocurrencies. But my case is not covered. 

Have you studied https://www.gov.uk/government/publications/tax-on-cryptoassets/cryptoassets-for-individuals ? It, together with the links within it, is quite comprehensive.

Janin1992

Thank you for your reply. Yes, I checked the guidance. My case is not covered. The closest activity is probably an airdrop provided in return for a service. I did a lot of transactions (several hundred thousands). All this activity is recorded on a blockchain.

What do I do? I think I had to do a right thing and declare it to HMRC so they can look and make a judgement. What is the right way to disclose it?

[Deleted User]

Janin1992 said:

Thank you for your reply. Yes, I checked the guidance. My case is not covered. The closest activity is probably an airdrop provided in return for a service. I did a lot of transactions (several hundred thousands). All this activity is recorded on a blockchain.

What do I do? I think I had to do a right thing and declare it to HMRC so they can look and make a judgement. What is the right way to disclose it?

My advice would be to seek professional advice from a tax specialist immediately. Regardless of what you submit, the late declarations will most likely prompt a closer look by HMRC and you need the expertise, not only in arriving at a liability, but in dealing with HMRC - well outside the scope of a forum such as this. 

Jeremy535897

The closest activity is probably an airdrop provided in return for a service.

If you have received payment in kind for a service, then it sounds like you are a self employed person carrying on a trade, and you have to include the value of what you receive at the time as income from self employment. I totally agree with purdyoaten that you must seek specialist advice as soon as possible. See https://taxaid.org.uk/guides/taxpayers/undeclared-income/step-1-get-advice

Janin1992

I will try to contact a tax adviser. Hopefully I will be able to find somebody on such short notice. But I need a backup plan in case I cannot find a tax adviser and have to disclose myself.

I prepared excel file with all my transactions (extracted them from blockchain). How do I assign value to what I received? Until recently as far as I know it was not even possible to withdraw GBP from reputable exchanges. What I did is I found historic end of day prices and used them to calculate profit and loss for each day. Is this a reasonable approach?

Jeremy535897

If you received assets for services, the price on the day of receipt seems the right figure to use.

Janin1992

It proves to be impossible to find a tax adviser at this time of the year. Everybody is busy until February. Well, what can I do. DIY route is the only one left

dctrgre

Janin1992 said:

It proves to be impossible to find a tax adviser at this time of the year. Everybody is busy until February. Well, what can I do. DIY route is the only one left

This may not be the wisest option. Based on your first post you have already filed a return for 18/19. It may be better to work with an accountant/tax adviser in February and correct your 17/18 and 18/19 positions as one exercise / writing to HMRC.

Have you already submitted your 19/20 return? Are there similar issues for that year?

Jeremy535897

Google tax investigation specialist. You should find a reputable firm willing to offer an initial free call.

Janin1992

No, I did not submit 19/20 yet.

Yes, there are similar issues for that year. I need to declare about £13000 as income.

If I do not submit correction for 18/19 I will lose an opportunity to correct it.

I do not want to wait for HMRC to open investigation first. I was going to submit correction for 18/19 and then voluntary disclose that figures for 17/18 are also incorrect. I think I will have 90 days after disclosure to provide more information. At this point tax adviser can take over. What could possibly go wrong?