Wealthy people in the UK are believed to be underpaying tax on their crypto investments, according to law firm Pinsent Masons.
In its latest data, HM Revenue & Customs (HMRC) identified around £428,000 ($590,000, €506,310) in missing tax from rich investors on their cryptocurrency holdings in 2020, the law firm said.
This shows a 202% increase from the £142,000 believed to be underpaid the previous year.
A spokesperson for the law firm told International Adviser that, when it comes to crypto, there could be two types of tax wealthy people could owe: capital gains tax (CGT), but also income tax if they trade these types of assets.
As interest and demand for cryptocurrency is expected to surge, Pinsent Masons believes tax underpayment will follow suit as well.
But tax on crypto is not the only one being underpaid by the wealthy, the law firm found:
- Capital gains tax jumped by 57% to £752m in 2020, up from £293m in 2019; and,
- Inheritance tax grew by 43% to £353m, compared with £247m the year before.
Steven Porter, partner at Pinsent Masons, said: “These figures confirm that HMRC is now actively looking for wealthy individuals evading tax on their cryptocurrency investments.
“Even though these are only modest amounts at the moment, we expect this to increase considerably.
“HMRC’s ability to gather information on crypto holdings is seemingly still at an early stage but will no doubt increase, given the popularity of these assets. It seems likely that the next step will see HMRC increase international cooperation with overseas tax authorities to get more data from overseas cryptocurrency exchanges and brokers.”