Tax and cryptocurrencies: why we need more than a nudge

While the question of whether or not cryptocurrencies are an asset appears to have at least in part been settled there remains great uncertainty as to how the UK should tax profits from investing in cryptocurrencies. Such uncertainty is causing investors and tax professionals to adopt increasingly disparate approaches to reporting profits on cryptocurrencies.

HMRC has been using its extensive information gathering powers to obtain details of holders of cryptocurrencies through the cryptocurrency exchanges. For example Coinbase one of the best known exchange platforms has confirmed that it has provided details of all UK resident taxpayers who in 2019/20 entered into cryptocurrency transactions worth more than £5 000. HMRC has now started to send out ‘nudge’ letters to...