As cryptocurrency trading has steadily increased since 2009, the last year has seen a surge in crypto investments, alongside an increase in underpaid tax from these investments. The trend poses a new issue for accountants, who will need to ensure cover is in place to protect themselves from possible claims.
According to data from the HMRC, the amount of tax potentially underpaid by cryptocurrency investors tripled between 2020 and 2021. A report published by the tax office identified £428,000 in “tax under consideration” for cryptocurrency investments in this year to 31st March, compared to £142,000 for 2020.
As a result, the HMRC have sent letters to holders of crypto assets to encourage investors to ensure they have paid the correct amount of income and capital gains tax (CGT) on any income they have received from their crypto asset holdings. A copy of the letter can be found here.
The HMRC also published guidance explaining what taxes investors may need to pay and what records they need, which can be found here.
This increased popularity in crypto investments is also important for accountants to ensure the correct amount of tax is paid by their clients. As cryptocurrency is so new, they will need to stay up to date with the HMRC and their regulatory body on any accounting standards specific to cryptocurrency.
It is also important when accountants are reviewing their clients share transactions to pay attention to detail as that is where some of our clients notice there are crypto transactions.If clients do receive notice from the HMRC of unpaid CGT it is possible that the client could, in turn, make a claim against their accountant for incorrectly submitting the accounts on their behalf.
As accounting regulations around cryptocurrencies continue to evolve, it is more important than ever that accountants ensure they have enough cover in place to protect them in the event of claim and take into consideration the potential exposure. As your broker, we can help advise you on your Professional Indemnity Insurance needs and advise accordingly.