- The United Kingdom tax office is targeting businesses that provide cryptocurrency services.
- HMRC, which is focused on collecting taxes, wants to impose heavy sanctions on those who do not pay taxes.
According to information from the United Kingdom Tax Office, new regulations could allow some businesses to have their cryptocurrencies seized.
The United Kingdom Tax Office Proposes New Regulations!
The United Kingdom tax office HM Revenue and Customs (HMRC) is considering new regulations that would allow businesses that do not pay their taxes to have their cryptocurrency seized. The move is part of a wider initiative to modernize tax collection in the digital age, which includes exploring the agency’s powers to digital payment platforms like PayPal. The proposal is outlined in a consultation document published by HMRC, which acknowledges the difficulties of implementing such measures given the variable nature of cryptocurrency values.
HMRC currently has the power to seize funds in bank accounts under “direct debt collection” powers, but the agency is exploring new ways to collect unpaid taxes with the growth of e-commerce and the increasing use of cryptocurrencies for online transactions.
HMRC has also announced plans to include cryptocurrencies in self-assessment tax returns. This move is expected to generate an additional £10 million in capital gains taxes per year on undeclared profits. The decision to include cryptocurrencies in tax returns is part of HMRC’s efforts to adapt the tax system to changing business practices in the digital age.
An HMRC spokesperson emphasized that the agency’s powers are balanced with safeguards to ensure that these powers are applied fairly and consistently. While law enforcement currently has the power to seize cryptocurrencies from centralized online exchanges like Coinbase Global Inc., Binance, and Kraken in cases of criminal activity, the proposed regulations would expand this power to include the cryptocurrency wallets owned by businesses.
This expansion of powers to seize funds from digital wallets, including cryptocurrencies, is part of HMRC’s plan to adapt to new business practices and ensure that tax collection keeps pace with digital developments. While HMRC is aware of the difficulties of implementing such measures, it believes that they are necessary to ensure that businesses pay their fair share of taxes. Therefore, HMRC is consulting with stakeholders to ensure that the proposed regulations are fair and effective in achieving their intended goals.
Challenges in Implementing New Regulations
The HMRC consultation document acknowledges the challenges of implementing new regulations, particularly given the variable nature of cryptocurrency values. However, the document suggests that if more regulation is introduced around digital currencies, cryptocurrency wallets could become a more popular payment method for goods and services.
The proposed regulations are part of a wider effort by HMRC to modernize tax collection practices in the digital age, as businesses increasingly operate with fewer physical and owned assets in the United Kingdom. This makes it more difficult for HMRC to collect unpaid taxes, hence the need to explore new ways of collecting taxes.
Another challenge that HMRC may face is the potential for businesses to transfer their cryptocurrency assets to wallets located in jurisdictions where HMRC’s powers do not extend, in order to avoid tax obligations. This could result in HMRC being unable to collect unpaid taxes from these businesses, ultimately undermining the effectiveness of the proposed regulations.
