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UK’s HMRC Seeks Tool to Track Crypto Tax Evaders

hmrc
hmrc

Her Majesty’s Revenue and Customs (HMRC), the tax authority for the United Kingdom, has opened the doors to contractors looking to help it in its mission to curb crypto-enabled tax evasion. 

Last week, the cybercrime team at the tax agency posted an open contract worth £100,000 (about $131,000), asking for an intelligence-gathering technology that will aggregate information through cluster analysis. With this technology, the team hopes to correlate digital asset transactions with service providers efficiently. The agency is reportedly moving away from human analysis and unverifiable online tools, as it gears up for more clarity concerning crypto-related tax evasion and the mechanisms that allow it to thrive. 

Surveillance is a Big Issue for the HMRC

The cybercrime team was inaugurated to protect the British government’s tax agency against fraud. The HMRC’s repayment system has long been the subject of criticism for its vulnerability to malware and Distributed Denial of Service (DDoS) attacks, given the volume of traffic, it should receive as an essential government platform.

The agency plans to use this tool to seamlessly track and analyze large-cap digital assets. Privacy-focused coins such as DASH, ZCash, and Monero, known for being rather difficult for regulators to monitor would also be considered.

“Crypto-assets, such as Bitcoin and Ethereum, provide a means to transfer value between interacting parties. These services are increasingly used for a range of purposes, from international money transfers, sales of digital services, paying staff and tax evasion and money laundering,” the contract read in part. 

Interested parties are expected to send their applications starting from next week, but no later than January 31, 2020. The HMRC also reportedly plans to award the contract and get to work as early as February 17, 2020.

Crypto Tax Codes Have Taken Shape 

The tax agency has been rather particular in its treatment of cryptocurrencies, especially since it recently denounced cryptocurrencies as a form of money. Last November, it updated its tax policy paper for both businesses and individuals, where it explicitly stated that digital assets aren’t to be considered as a form of currency. 

For individuals, the policy paper considers crypto activity as personal investments that are still subject to capital gains tax and which should be paid to the HMRC when crypto is sold for fiat currency, if the digital asset in question is used to make purchases, if it is gifted, or if the asset is exchanged for another asset. 

Also, if an employee is paid in crypto, then it is subject to income tax. The policy addressed mining as well, considering it as a security, although it pointed out that it will be reviewing the factors that will determine its classification.

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