In the latest episode of the LifeStyled Club’s podcast, Tax Litigation and Resolution Director Lisa Vanderheide provided an introduction to cryptocurrency and the tax implications for crypto investment vehicles.
The Lifestyled Club says: “Professional footballers getting involved in various businesses and brands is nothing new, but when it comes to investing their money, the landscape seems to be changing. Many footballers are now moving away from some of the more traditional investments and are turning to some of the latest ways to invest their money, such as cryptocurrency.”
Listen to the episode here:
When is crypto taxed as income?
The novelty and volatility of the crypto market makes it confusing to navigate for even seasoned professionals. Lisa notes in the podcast that cryptocurrency’s viability as a long-term investment remains largely untested, with some individuals making large ‘gains’ that they have then lost. Studying the market and taking financial advice is essential before investing.
From HMRC’s perspective, profit resulting from a rise in the value of cryptocurrency is considered a ‘capital gain’, and treated in the same way as stocks and shares. Because the assets are digital, many individuals do not realise that there are tax implications. HMRC are now beginning to send ‘nudge letters’ to some who have profited from crypto gains. The tax authority has previously sent information notices to cryptocurrency exchanges to obtain details for those who may owe tax for crypto profits.
What should you do if you receive a nudge letter about cryptocurrency?
Lisa says that the first step upon receiving a nudge letter should always be to contact an accountant who can correctly advise on next steps. Individuals can make disclosure to HMRC via an online portal, best for smaller issues, or directly if the gains were over a long period or high in value (greater than £10,000). Making a voluntary disclosure will help the individual with tax obligations maintain control of the process.
How is crypto regulated in the UK?
Cryptoassets are not regulated to the same degree as fiat money transactions in the UK. While the Financial Conduct Authority (FCA) has oversight on anti-money laundering processes in the crypto space, the assets themselves are not directly regulated. Losses resulting from decline in value of cryptocurrency are also not covered by any insurance which is currently available – current products only cover losses as a result of criminal activity, such as a security breach.
There is therefore an inherent risk in purchasing and maintaining cryptocurrency. Honesty and full disclosure, both to a financial adviser and HRMC, is the best policy when dealing with these complex issues.
If you have any questions about disclosing crypto gains to HMRC, please contact our Tax Litigation and Resolution team.
The LifeStyled Club
Founded by Helen Drury and Maggie Devine Inman, the LifeStyled Club is an online community for the wives and partners of current and former professional footballers. Freely available for public listening, the LifeStyled Club podcast gives a voice to this community, tackling a range of subjects from mental health and supporting sports stars to breaking down stereotypes.
Earlier in 2022, Barrington Atkins joined Charlotte Fryatt – wife of former footballer and Stewarts client Matty Fryatt – and podcast hosts Helen Drury and Maggie Devine Inman to discuss clinical negligence in football. After sustaining an Achilles tendon rupture, Matty’s career was prematurely ended as a result of pressure to play through the injury without treatment. Barrington advised Matty to bring legal action against his former club, in a case that would go on to settle out of court. That podcast is available to listen to here.
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