New crypto box takes SA return to the moon – Dion Seymour
Crypto Tax & Accounting Technical Director, Dion Seymour, discusses the new cryptoassets box for the self assessment return form and how it may lessen the tax gap, in AccountingWEB.
Dion’s article was published in AccountingWEB, 16 March 2023, and can be found here.
As part of the 2023 Spring Budget, it was announced that from tax year 2024/5 the self assessment (SA) return form is to be updated to include a ‘box’ for cryptoassets. Currently, cryptoasset gains are reported within “CG other” on the SA return.
A box is just a box – isn’t it? To an extent, yes and from the perspective of the taxpayer, this box does not create a new obligation as there is already a requirement to declare gains.
There is a risk that cryptoasset owners do not understand their tax obligations. HMRC’s market research found that the majority of cryptoasset owners were not within the ‘SA universe’, had limited understanding of capital gains and dealt with their tax affairs themselves.
When these factors are put together, non-declaration of gains does appear to be a risk. This change will make it clearer that cryptoasset gains need to be declared. Furthermore, as the market research also identified, 10% of adults owned or had owned cryptoassets, making it arguable that crypto isn’t niche anymore and should have its own box.
From the perspective of HMRC, identification of risk and tax gap is, at least partially, built from information in the SA return. As ‘SA other’ includes gains from other assets, further information is required to establish if the amounts declared are, potentially, from cryptoassets (I will spare you from the painful details). This box will remove uncertainty if cryptoassets have been declared and significantly reduce the effort to establish both the tax declared and the tax gap for cryptoassets.
It is the future that HMRC no doubt has its eyes on. Whilst they have gathered information from cryptoasset exchanges in the past, the game will change when the OECD’s “Crypto Asset Reporting Framework” (CARF) goes live (at an as-yet unknown time). This automatic exchange of information will significantly enhance the information available.
HMRC needs to enhance its risking approach and this change will make it more of a “matching exercise” by comparing CARF information against SA returns (or RTI records) to check if cryptoasset gains have been declared. A mismatch will raise eyebrows.
Whilst it may appear to be just a box, trust me, it is a herculean effort to change forms. I am unsure about the costing in the Budget red book for an additional £10m in tax, but that is a separate topic.
The world of cryptoassets is becoming less opaque and it is more important than ever to ensure that your client’s affairs are in order.