In an article by Citywealth, Partner of Andersen in the UK, Zoe Wyatt, explains that individuals must be aware of whether they are liable to pay capital gains tax when disposing of cryptoassets.

“For individuals, the main tax they need to be concerned with is whether they are liable to pay CGT when they dispose of their cryptoassets. That seems simple enough, but Zoe Wyatt, a partner at tax consultancy Andersen, highlighted that many don’t know when they are making a disposal and therefore misunderstand when they ought to declare a gain for tax purposes. “For those buying bitcoin and selling it at a gain back into fiat currency, they understand they’ll need to pay tax. But many do not appreciate that swapping one cryptocurrency for another or using tokens to pay for goods and services are also disposals”, she explained.

“There are now funds marketing to UHNWs to make their investment in Bitcoin. Those UHNWs need to be aware that these transactions will also be considered disposals. Wyatt explains that using Bitcoin to buy shares in a company is a disposal regardless of whether the underlying asset is Bitcoin, other cryptoassets or traditional investments such as real estate.

““An individual’s behaviour for tax non-compliance will dictate how far back HMRC can go in opening an investigation and the level at which penalties will be levied. Pre-2018, individuals may have fallen into the category of being ‘careless’ (which attracts a 6-year enquiry window and potentially lower penalties), but with all the information now available, including HMRC’s stated position in its Cryptoassets Manual, continued non-compliance is likely to be seen as ‘deliberate’ resulting in a 20-year enquiry window and maximum penalties which could be as much as 200% of the underpaid tax”, said Wyatt.

“Wyatt continued, “For those with potentially significant amounts of tax at stake there may be merit in considering whether an alternative view to HMRC’s normal stated position exists; for example, whether – on its own particular facts – a transaction might be so speculative as to constitute gambling and the gain exempt”.”