Treasury Committee: Cryptoasset industry – Call for Evidence
LITRG has responded to the Treasury Committee’s call for evidence into the cryptoasset industry, commenting on how the UK’s tax and benefits systems should adapt to fit the expanding cryptoasset industry.
In our submission, we highlight that:
- Contrary to popular belief, research shows that cryptoasset owners are much more likely to be lower-income and unrepresented taxpayers.
- Understanding about potential tax liabilities arising from cryptoasset activities among cryptoasset owners is low. The potential complexity in calculating these liabilities is high. The number of individuals who hold or have held cryptoassets appears to be increasing. This combination means that there is high chance of inadvertent tax non-compliance amongst unrepresented (or even represented) taxpayers.
- The current tax-free allowances (especially the capital gains tax annual exempt amount and trading allowance) are useful – but they do not protect everyone, because they may already be used against other gains or income.
Cryptoasset activity can lead to particular complexities for means-tested benefits, especially universal credit. This stems from the facts that cryptoasset holdings will usually need to be valued each assessment period, and there is no equivalent to the trading and miscellaneous income allowance in universal credit.
We urge the government to consider legislative reform in order to address these issues, as well as encouraging HMRC and DWP to do more to raise awareness about the tax and benefits impacts of cryptoasset activity.
Our submission can be found here.