Cryptocurrency transactions and HMRC

HM Revenue and Customs (HMRC), has been closely monitoring the use of cryptocurrencies in recent years. In order to investigate potential tax evasion or money laundering, they have implemented various methods to track and trace transactions made using digital currencies.

One way they do this is by analysing transaction data from cryptocurrency exchanges. These exchanges are required to register with HMRC and report any suspicious activity to them. HMRC also has the power to request information from exchanges, such as the identity of traders, in order to conduct investigations.

Another method used by HMRC is the use of advanced analytics software to identify patterns and anomalies in cryptocurrency transactions. This software can detect unusual activity, such as large amounts of money being moved between accounts, and flag it for further investigation.

HMRC also works closely with other government agencies and international organisations to gather information and intelligence on the use of cryptocurrencies. This includes sharing information with the Financial Conduct Authority (FCA) and the National Crime Agency (NCA) as well as participating in international task forces dedicated to tackling money laundering and other financial crimes.

HMRC is also encouraging taxpayers to disclose any cryptocurrency holdings or transactions they have made in order to avoid penalties or fines. They have published guidance on how to report cryptocurrency taxes and have set up a dedicated hotline for people to report any concerns or for assistance with reporting their taxes.

In summary, HMRC uses various methods such as analysing transaction data from cryptocurrency exchanges, using advanced analytics software, working with other government agencies and international organisations and encouraging taxpayers to report their cryptocurrency holdings and transactions, to investigate potential tax evasion or money laundering involving cryptocurrencies.

Our tax investigation team is made up of ex-HMRC inspectors and provide comprehensive support in relation to all HMRC enquiries. If you need help bringing your tax affairs up to date in relation to Cryptocurrencies, please get in touch to speak to one of our tax experts.