UK Tax Agency Steps Up Crypto Scrutiny with 81,000 Warning Letters

HM Revenue and Customs (HMRC) in the UK has sent 81,000 warning letters to cryptocurrency investors over suspected unpaid taxes. This marks a 25% increase from approximately 65,000 letters sent in the previous year, according to figures obtained by accountancy group UHY Hacker Young through a Freedom of Information request.

The letters, known as 'nudge' letters, give recipients an opportunity to disclose unpaid tax before HMRC opens a formal investigation. The agency has intensified scrutiny of cryptocurrency investors, with some attributing noncompliance to misunderstandings about complex rules or the assumption that transactions are invisible to authorities.

Crypto exchanges and lending can produce taxable events, including selling cryptocurrency for pounds, exchanging digital assets, spending on goods or services, and giving tokens to another person. The taxable amount depends on acquisition costs, disposal value, and applicable allowances.

HMRC's Cryptoasset Reporting Framework requires crypto service providers operating in the UK to collect identifying information and transaction summaries. International information exchanges will also provide HMRC with data about UK residents using providers in other participating jurisdictions, expanding its visibility into offshore transactions.

Starting in 2027, global reporting is expected to give HMRC substantially greater visibility into overseas transactions, with 52 jurisdictions providing data initially followed by 15 more in 2028. The changes are part of a wider UK effort to supervise cryptocurrency activity and develop new rules for regulated businesses.