HMRC Contemplates Implementing Regulations to Confiscate Cryptocurrency from Tax Noncompliant Businesses
The government is deliberating on proposals that would grant the tax agency the authority to access online wallets, as part of its plan to modernize tax collection methods in the digital era.
HMRC already possesses the power to confiscate funds from bank accounts under “direct recovery of debts” for unpaid taxes. The agency is now exploring the possibility of extending this authority to online payment accounts, including PayPal.
An HMRC consultation document suggests that businesses’ cryptocurrency wallets might also be targeted if digital currencies become a widespread mode of online payment.
The potential seizure of cryptocurrencies from wallets is viewed as the latest regulatory move against the industry, which has faced accusations of facilitating money laundering and criminal activities. Cryptocurrencies such as Bitcoin have been promoted as a means of allowing individuals to control their finances beyond government reach.
While only the owner can access cryptocurrency wallets managed by individuals, those hosted on centralized online exchanges like Coinbase, Binance, and Kraken could be subject to the proposed regulations.
Currently, law enforcement agencies can seize cryptocurrencies from these exchanges in cases of detected criminal activity.
The HMRC consultation document states that if further regulations concerning digital currencies are introduced, cryptocurrency wallets might become a more prevalent method for purchasing goods and services online.
The document adds that the fluctuating value of cryptocurrency makes it uncertain how feasible this would be.
The government plans to proceed with granting HMRC the power to seize funds from digital wallets, although it remains unclear if this will encompass cryptocurrencies.
An HMRC spokesperson said, “The proposals will help ensure HMRC’s debt collection keeps pace with business practices. E-commerce means new business practices with fewer physical and owned assets held in the UK, which makes it harder for HMRC to collect unpaid taxes using existing powers.”
They added that the responses to the consultation would help the government conduct further analysis and engage in discussions on the proposals, emphasizing that HMRC’s powers are balanced by safeguards to reassure taxpayers about the proportionate and consistent exercise of these powers.
Police have confiscated hundreds of millions of pounds in cryptocurrency connected to criminal activities, often auctioning it off.
HMRC recently announced the inclusion of cryptocurrencies in self-assessment tax returns, which is expected to result in an additional £10m per year in capital gains taxes on unreported profits.
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