HMRC holds Bitcoin amid plans to seize crypto from tax evaders
HMRC are considering introducing rules that will enable them to seize cryptocurrency from businesses that fail to pay tax.
The government is considering proposals that would give the tax authority powers to access online wallets as part of plans to modernize how tax is collected in the digital age.
HMRC is already able to seize funds from bank accounts when individuals do not pay tax under “direct debt recovery”, but is considering extending this to online payment accounts such as PayPal.
A consultation document from HMRC raises the prospect that this could include businesses’ cryptocurrency wallets if virtual currencies become a common way of making payments online.
The prospect of seizing cryptocurrencies from wallets will be seen as the latest attack on the sector, which has been accused of allowing money laundering and criminal activity. Cryptocurrencies such as Bitcoin have been touted as ways to give owners control over their finances outside of government control.
While cryptocurrency wallets operated by individuals can only be accessed by the owner, those at centralized online exchanges such as Coinbase, Binance and Kraken may be subject to the rules.
Law enforcement agencies are currently able to seize cryptocurrencies from these exchanges when they detect criminal activity.
“If further regulation is brought in around digital currencies, it is possible that cryptocurrency wallets could become a more popular method of paying for goods and services,” an HMRC consultation document said.
It added that “it was unclear how easy this would be due to the fluctuating value of cryptocurrency”.
The government said it expected to go ahead and give HMRC powers to seize funds from digital wallets, although it is unclear whether this would apply to cryptocurrencies.
An HMRC spokesman said: “The proposals will help ensure that HMRC’s debt collection keeps pace with business practice. E-commerce means new business practices with fewer physical and owned assets held in the UK, making it harder for HMRC to collect unpaid taxes using existing powers.
“The responses to this consultation will support the government in undertaking further analysis and engagement with the proposals.
“All of HMRC’s powers are balanced by safeguards, which should reassure taxpayers that powers are exercised proportionately and consistently.”
Police have seized hundreds of millions of pounds in cryptocurrency linked to criminal operations, often auctioned off.
HMRC recently said that cryptocurrencies will be added to tax returns. That would mean an extra £10m a year in capital gains tax on profits that are currently not reported, forecasters estimate.
