British tax authorities are to be given the power to seize Bitcoin held on exchanges
HM Revenue and Customs (HMRC) is proposing the introduction of new regulations that would give it the power to seize cryptocurrencies from companies that do not pay crypto taxes.
As part of preparations to modernize how taxes are collected in the digital era, the government is now considering proposals that would give the tax authorities the opportunity to access electronic wallets. This will be part of the strategy to modernize how taxes are collected, according to a report published by the British news agency The Telegraph published May 7.
When people refuse to pay tax and fall under ‘direct debt recovery’ powers, HMRC already has the ability to seize funds from bank accounts. However, the organization is considering expanding this option to include online payment accounts such as PayPal.
In a consultation note, HMRC raised the possibility that this could include the cryptocurrency wallets of companies should the use of virtual currencies as a method of making online payments become widespread.
Encryption
The ability to remove cryptocurrency from wallets will be seen as the next “crackdown” on a sector that has been accused of facilitating illegal behavior and money laundering. The use of cryptocurrencies such as Bitcoin, which are not regulated by any central authority, has been promoted as a method for individuals to regain control of their finances outside of government control.
These crowd-controlled cryptocurrency wallets can only be accessed by their owner, but those stored on centralized online exchanges such as Coinbase, Binance and Kraken may be subject to the regulations.
When they find evidence of illegal behavior, law enforcement authorities now have the ability to confiscate cryptocurrency from these exchanges and keep it as evidence.
“If further regulation is brought in around digital currencies, it is possible that cryptocurrency wallets could become a more popular method of paying for goods and services,” an HMRC consultation document said.
A spokesman for HMRC said:
“The responses to this consultation will support the government in undertaking further analysis and engagement with the proposals. All of HMRC’s powers are balanced by safeguards, which should reassure taxpayers that powers are exercised proportionately and consistently.”
Recent statements from HMRC indicate that cryptocurrency will be included in tax returns. According to estimates made by financial experts, this would result in an annual increase in capital gains tax of £10m for profits not currently disclosed.
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