HMRC warning as thousands told 'don't ignore it' or you could face major bill - The Mirror

HMRC is cracking down on cryptocurrency owners and has begun sending nudge letters to people it suspects of failing to pay the correct tax on crypto earnings

Brits are being warned not to "ignore" a new nudge letter being sent out by HMRC as they could face severe fines.

HMRC is cracking down on cryptocurrency owners and has begun sending nudge letters to people it suspects of failing to pay the correct tax on crypto earnings. The tax treatment of crypto assets can be complex. However, in simple terms, HMRC sees the profit or loss made by buying and selling crypto fall under Capital Gains Tax (CGT).

In the letter, HMRC warns that if an assessment concludes that there is tax to pay on your crypto assets that have not been paid, then you could face a penalty - which can be up to 100% of the tax due - as well as interest due on any late payments.

According to the accountancy firm BDO, HMRC can have up to 20 years to assess additional tax on crypto. So you could potentially face a major bill if you ignore the letter.

Andy Wood, a crypto expert at Tax Natives warned that if you have received one of these nudge letters, there is likely data somewhere that has led HMRC to send it. This means it is wise not to "ignore" these letters. He added: "Although you are not legally obliged to respond, ignoring the letters is probably not wise. HMRC clearly states in the letters that if you don’t respond within 60 days, they may open a compliance check, which could escalate into a formal inquiry."

Accountancy firm BDO says these letters may have also been sent to those HMRC knows have "disposed" of crypto assets. These disposals will include circumstances where people have exchanged one cryptocurrency for another or paid for a product or service using cryptocurrency.

Paul Falvey, a tax partner at BDO said: "Many owners of crypto assets may not be fully aware of their obligations and may not have filed a tax return before. They could well get a shock when this letter hits the doormat but the worst thing they could do is to ignore it.

“To bring their tax position up to date, individuals may need to source reports from their financial advisers or online platforms. In certain circumstances, those affected would do well to seek specialist advice on the most appropriate disclosure facility to use.

BDO noted that HMRC already receives data from cryptoasset digital platforms about the transactions of those buying and selling cryptocurrencies or other assets on request. In future, they will receive this information automatically so if you are a crypto trader, it's a good idea to get your taxes in order to avoid any issues in the future.