HM Revenue & Customs (HMRC) will be sending out letters to crypto investors with a warning to check they have paid the right tax.

The purpose of the letters is to encourage investors to review the Capital Gains Tax (CGT) and, in some cases, income tax that has been paid on their crypto holdings and to ensure the amount is correct.

The letters show an intent from HMRC in ensuring the proper amounts of CGT and income tax are paid on cryptocurrency investments. A freedom of information request recently confirmed that HMRC had gathered information on the names, addresses and value of assets held by crypto investors in and outside the UK for the tax years 2017-18 to 2019-20.

HMRC commented: “Our letter asks cryptoasset holders to review their transactions to ensure that they are declared correctly. We have published detailed guidance to help our customers apply tax law to cryptoassets correctly.”

HMRC and cryptoasset guidance

On 30 March 2021, HMRC published their internal guidance manual on cryptoassets.

HMRC’s Cryptoassets Manual can be found here.

It should be noted that this guidance outlines HMRC’s interpretation of the law in relation to cryptoassets – it is not legislation specifically addressing their tax treatment.

Although cryptoassets are commonly referred to as cryptocurrency, HMRC do not regard them as either currency or money but as an intangible asset.

Intangible assets are classed as a ‘chargeable asset’ for CGT if they are both capable of being owned and have a value that can be realised.

How M+A Partners can help

A common presumption is that cryptoasset transactions are not chargeable to tax. However, it is HMRC’s view that individuals should check if they need to pay tax when they sell and receive cryptoassets.

Understanding your financial position and tax requirements is important when dealing with cryptoassets, regardless of whether a letter from HMRC is received. Our team are here to help ensure any gains or losses are correctly recorded within a tax return and any reliefs that can be claimed are applied.

For any help or guidance please get in touch with your usual M+A Partners contact or email