UK tax authority may seize cryptocurrencies to collect unpaid taxes – Cryptopolitan

The UK tax authority, HM Revenue and Customs (HMRC) is considering new regulations that would allow it to seize cryptocurrencies from businesses that fail to pay their taxes. The move is part of a wider initiative to modernize tax collection in the digital era, which includes exploring the possibility of extending HMRC’s powers to digital payment platforms such as PayPal. The proposal is outlined in a consultation document released by HMRC, which also acknowledges the challenges of implementing such measures, given the volatile nature of cryptocurrency values.

HMRC currently possesses the authority to confiscate funds from bank accounts under “direct recovery of debts” powers, but with the growth of e-commerce and the increasing use of cryptocurrencies for online transactions, the agency is exploring new ways to collect unpaid taxes.

Cryptocurrencies to be included in self-assessment tax returns

HMRC has also announced plans to include cryptocurrencies in self-assessment tax returns. This move is expected to generate an additional £10 million per year in capital gains taxes on unreported profits. The decision to include cryptocurrencies in tax returns is part of HMRC’s efforts to ensure that the tax system keeps pace with changing business practices in the digital age.

The spokesperson for HMRC emphasized that all of the agency’s powers are balanced by safeguards to ensure the fair and consistent application of these powers. While law enforcement agencies currently have the authority to seize cryptocurrencies from centralized online exchanges such as Coinbase Global Inc., Binance, and Kraken, in cases of criminal activity, HMRC’s proposed regulations would extend this power to business-owned cryptocurrency wallets.

This proposed extension of power to seize funds from digital wallets, including cryptocurrencies, is part of HMRC’s plan to keep up with new business practices and ensure that tax collection keeps pace with digital advancements. While HMRC recognizes the challenges involved in implementing such measures, the agency believes that they are necessary to ensure that businesses pay their fair share of taxes. As such, HMRC is consulting with stakeholders to ensure that the proposed regulations are fair and effective in achieving their intended goals.

Challenges in implementing the new regulations

The HMRC consultation document acknowledges the challenges in implementing the new regulations, particularly in relation to the volatile nature of cryptocurrency values. However, the document suggests that if further regulations are brought in around digital currencies, it may be that cryptocurrency wallets will become a more popular method of paying for goods and services.

The proposed regulations are part of a wider effort by HMRC to modernize tax collection practices in the digital era, where businesses are increasingly operating online with fewer physical and owned assets in the UK. This makes it harder for HMRC to collect unpaid taxes using existing powers, hence the need to explore new avenues of tax collection.

Another challenge that HMRC may face is the potential for businesses to avoid tax obligations by simply transferring their cryptocurrency holdings to wallets based in jurisdictions where HMRC’s powers do not extend. This could result in a situation where HMRC is unable to recover unpaid taxes from these businesses, ultimately undermining the effectiveness of the proposed regulations.

Conclusion

HMRC’s proposed regulations to seize cryptocurrencies from businesses failing to pay their taxes are part of a larger initiative to modernize tax collection in the digital age. The proposal, outlined in a consultation document, acknowledges the challenges of implementing such measures, particularly in relation to the volatile nature of cryptocurrency values. The agency is also planning to include cryptocurrencies in self-assessment tax returns, in a move expected to generate an additional £10 million per year in capital gains taxes on unreported profits.