The recent surge in interest and value in cryptocurrencies is likely to lead to increased scrutiny on its links to organised crime, according to a top accountancy firm.
The organised crime ecosystem is becoming increasingly digital and now there are concerns it is being used by tax evaders.
HMRC is set to demand data on holdings of cryptocurrencies from taxpayers it suspects of tax evasion and advice, accountancy firm UHY Hacker Young said.
The tax authority will reportedly include explicit demands for information on crypto and other assets used by organised crime in its “statement of assets” form.
Leading currencies Bitcoin and Ethereum and assets in e-money wallets like Paypal will be under the spotlight. Other controversial assets include assets in “value transfer” systems such as Black Market Pesos, typically used by Mexican and Colombian cartels, and the Chinese Fei ch’ien.
“Some assets like Black Market Pesos are almost exclusively used by organised crime but criminal proceeds flow through relatively mainstream assets like Bitcoin at a rate that some find alarming. For example, cybercriminals overseas take virtually all of their ransom payments in Bitcoin to avoid detection,” David Jones, director at UHY Hacker Young said.
“While criminals can still choose to not declare these assets, doing so gives HMRC another opportunity to bring criminal charges against them if their forensic work finds a hidden Bitcoin wallet,” he added.
The move indicates increasing concern at HMRC that crypto assets used by tax evaders are slipping through the net. “This demand for information is an important step in HMRC’s fightback against that,” Jones said.
It comes just a month after the publication of HMRC’s new Cryptoassets Manual, which states individuals are liable to pay income tax and National Insurance contributions on cryptoassets which they receive from their employers as a form of non-cash payment.
HMRC was contacted for comment.