The HM Revenue and Customs (HMRC) is proposing the introduction of new regulations that would give it the authority to take cryptocurrencies from companies that do not pay their crypto taxes.
As a part of preparations to modernize how taxes are collected in the digital era, the Government is now considering suggestions that would give the tax agency capabilities to access online wallets. This would be part of the strategy to modernize how taxes are collected, according to a report published by the UK news outlet The Telegraph published on May 7.
When people refuse to pay taxes and fall under “direct recovery of debts” authorities, HMRC already has the ability to seize funds from bank accounts. However, the organization is contemplating expanding this capability to include online payment accounts such as PayPal.
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In a consultation paper, the HMRC raises the possibility that this may encompass the cryptocurrency wallets of companies in the event that the use of virtual currencies as a method of making online payments becomes widespread.
Crypto crackdown
The possibility of removing cryptocurrency from wallets would be seen as the next “crackdown” on a sector that has been accused of facilitating illegal behavior and money laundering. The use of cryptocurrencies like Bitcoin, which are not regulated by any central authority, has been promoted as a method for individuals to regain control of their finances outside of government control.
Those cryptocurrency wallets that are controlled by people may only be accessed by the owner, but those that are stored on centralized online exchanges like Coinbase, Binance, and Kraken may be subject to the regulations.
When they find evidence of illegal conduct, law enforcement authorities now have the ability to confiscate cryptocurrency from these exchanges and keep it as evidence.
“If further regulation is brought in around digital currencies, it may be that cryptocurrency wallets may become a more popular method of paying for goods and services,” a HMRC consultation document states.
A HMRC spokesman said:
“The responses to this consultation will support the Government in undertaking additional analysis and engagement on the proposals. All of HMRC’s powers are balanced by safeguards, which should reassure taxpayers that powers are exercised proportionately and consistently.”
Recent statements made by HMRC indicate that cryptocurrency would be included into self-assessment tax returns. According to estimates made by financial experts, this would result in an annual increase in capital gains taxes of £10 million for profits that are not now disclosed.
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