The tax authorities in the UK will soon be granted power to seize Bitcoins held on crypto exchanges. The HM Revenue and Customs (HMRC) is proposing a legislation to this effect to seize the assets of crypto companies that fail to pay their taxes.
If granted, the tax body will be able to access online wallets holding Bitcoins and confiscate them on exchanges. UK news outlet The Telegraph publication on May 7 says that the strategy is in line with efforts to modernize taxation in the country.
While the HMRC already has capacity to seize funds in traditional bank accounts, it is seeking greater capabilities to seize digital assets as well as funds on payment platforms such as PayPal. This will not affect cryptocurrencies held in private wallets, but digital assets on centralized exchanges such as Binance and Coinbase can be seized and held as evidence.
The UK and Cryptocurrencies
The UK is so far one of the most friendly countries towards cryptocurrencies, especially in the area of regulation. The financial conduct authority (FCA) recently requested inputs from crypto companies to create a regulatory framework for the country.
Infact, the country has repeatedly demonstrated that it wants to become a crypto hub for crypto startups, backed by its new prime minister Rishi Sunak.
While the powers sought by he HMRC may seem contrary to the country’s friendly tendencies towards crypto, the issue of crypto taxation is something every country is working on, including those without any regulations such as the U.S.
With the proper regulatory framework, it is expected that crypto companies will flock to the UK and the tax agency is trying to up its game to effectively hold such companies accountable in the area of remitting their taxes.
“If further regulation is brought in around digital currencies, it may be that cryptocurrency wallets may become a more popular method of paying for goods and services,” a HMRC stated in its consultation document.
Other countries that are seeking to create tax havens are Australia, and Hong Kong, both of which are achieving this with the right regulations that will favor crypto startups and in turn generate revenue for the governments.
HMRC Assures Taxpayers of Lawful Conduct
It’s natural for crypto investors and companies to see the new legislation as an attack on the crypto industry. After all, cryptocurrencies are supposed to be immune to any form of seizure and central control from the government.
However the HMRC in its consultation document assures that its use of the powers it seeks will be guided by the law and only applied if their is need to do so.
“The responses to this consultation will support the Government in undertaking additional analysis and engagement on the proposals. All of HMRC’s powers are balanced by safeguards, which should reassure taxpayers that powers are exercised proportionately and consistently,” it stated.
With this legislation in place, the UK has positioned itself to maximally benefit from crypto tax revenue, but it could also potentially turn away many startups that would otherwise prefer the country. Crypto companies may not have a problem with remitting taxes, but instead with lack of regulation.
Hopefully the HMRC will stick to the constitutional provisions when wielding the powers they seek, because the possibility of abuse of power cannot be ruled out completely.