HMRC to hold Bitcoin as part of plans to seize crypto from tax evaders

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HMRC is considering introducing rules that would allow it to seize cryptocurrency from businesses that fail to pay their taxes.

The government is considering proposals that would give the tax authority the power to access online wallets as part of plans to modernize the way taxes are collected in the digital age.

HMRC is already able to seize funds from bank accounts where individuals are not paying tax under direct debt collection powers, but is considering extending this to online payment accounts such as PayPal.

A consultation paper from HMRC raises the prospect that this could include companies’ cryptocurrency wallets if virtual currencies become a common means of making payments online.

The prospect of grabbing cryptocurrencies from wallets would be seen as the latest crackdown on the industry, which has been accused of enabling 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 are only accessible by the owner, those on centralized online exchanges such as Coinbase, Binance and Kraken could be subject to the rules.

Law enforcement is currently able to seize cryptocurrencies from these exchanges when they detect criminal activity.

If additional regulation is introduced around digital currencies, cryptocurrency wallets may become a more popular method of payment for goods and services, according to an HMRC consultation paper.

He added that it was unclear how easy it would be due to the fluctuating value of cryptocurrency.

The government has said it plans to go ahead and give HMRC the power to seize funds from digital wallets, although it is unclear whether this will extend to cryptocurrencies.

An HMRC spokesperson said: The proposals will help to ensure that the collection of HMRC debts keeps pace with business practice. E-commerce means new business practices with fewer physical and UK-owned assets, making it harder for HMRC to collect unpaid taxes using existing powers.

The responses to this consultation will help the government undertake further analysis and engagement on the proposals.

All of HMRC’s powers are balanced by safeguards, which should reassure taxpayers that the powers are exercised in a proportionate and consistent manner.

Police have seized hundreds of millions of pounds in cryptocurrency linked to criminal operations, often auctioning them off.

HMRC said recently that cryptocurrencies will be added to self-assessment tax returns. This will mean an additional 10 million a year in capital gains taxes on profits that are not currently reported, forecasters estimate.

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