In a significant step in relation to the taxation of cryptocurrencies held by UK tax residents, HMRC has begun a campaign of dispatching 'nudge' letters to those in the UK it believes may have undeclared UK tax liabilities connected to their cryptoassets, as outlined in this ftadviser.com article.

In recent months HMRC have been using their information gathering powers to make formal, legal requests of crypto exchanges located in the UK to disclose information HMRC believes is relevant to the tax affairs of UK individuals. Tax residency is decided simply by a person's presence in the UK across the tax year and, in its most simplistic form, is a day counting exercise.

It seems that the exchanges in question have now passed the information requested to HMRC and it has instigated a mass-mailing system in order to prompt taxpayers to review their affairs. Previous such HMRC mass-mailing campaigns have been run for non-UK domiciles resident in the UK, certain professions that are largely self-employed and a variety of other sectors HMRC views as at high-risk of poor tax compliance.

I anticipate that the relevant 'nudge' letter will be widely and vaguely drafted but will no doubt cause the recipient considerable concern. Indeed previous 'nudge' letters have included reference to seeking expert advice to regularise that individuals tax affairs or request the recipient sign a confirmation that they have nothing further to declare.  It is imperative that next steps are considered closely. Whilst HMRC's new crypto manual has clarified their view on the taxation of their certain cryptoassets, there remains uncertainty - and where uncertainty persists mistakes and omissions can easily occur.