HMRC crypto-asset voluntary disclosure service

HMRC has publicised a voluntary disclosure service for individuals who may have failed to pay tax on any income or gains from crypto-assets. The announcement suggests that HMRC see crypto-assets as an area of significant focus, potentially involving large amounts of unpaid tax.

The service can be used where an individual has identified that any unpaid tax on crypto-assets such as exchange tokens (for example, bitcoin), NFTs (non-fungible tokens) or utility tokens.

The service notes that the period covered by the service will depend on the nature of the original error in failing to declare tax. Taxpayers should declare unpaid tax for the following periods:

• 4 years if the error was made despite the taxpayer taking reasonable care
• 6 years where the error was due to carelessness
• up to 20 years if the error was deliberate.

The service also requires taxpayers to work out any interest on underpaid tax and penalties for failure to declare tax on such transactions.

The voluntary disclosure service does not hold out any particular amnesty or advantageous treatment for persons taking advantage of it. As such, it is in practice no different to the ability to make a voluntary disclosure in the normal course. However, the announcement seems certain to herald a focus by HMRC on unpaid tax on crypto-asset transactions and it will be extremely important for taxpayers to promptly and accurately deal with any past failures to avoid additional complexities and penalties in future. In particular, the penalties for unprompted disclosures can be significantly lower than for prompted disclosures.