The accountancy firm explained that HMRC’s statement of assets form, which is used to demand a complete accounting of all a taxpayer’s assets in an investigation, will now include “explicit demands” for information on cryptos and other assets including those commonly used by organised crime.
Amongst the assets include cryptoassets, such as Bitcoin and Ethereum, and assets in “value transfer” systems, such a Black Market Pesos, a system commonly used by Mexican and Colombian drug cartels, which converts drug sale revenues in the US and Europe to local currencies without the money having to cross a border.
Another asset noted is Hundi, an Indian system of credit notes that has existed since the 12th Century and is still used by merchants, as well as Hawala, a similar money transfer system common in the Middle East and Africa.
Finally, Fei ch’ien, a trust-based money transfer system commonly used in China’s hidden financial system, is also included in the relevant assets.
The firm claimed there has been an increasing concern at HMRC over the past few years that the tax authority has not been able to identify cryptoassets used by tax evaders.
This new demand for data on these assets will aim to be a “further step in its attempt to get to grips with the problem”.
David Jones, director at UHY Hacker Young, said: “HMRC suspects that an increasing amount of hidden wealth is slipping through its fingers thanks to the rise of cryptocurrencies and other unsanctioned money transfer systems. This demand for information is an important step in HMRC’s fightback against that.
“The initiative comes hand in hand with HMRC’s publication of its new Cryptoassets Manual. A defence of ignorance of the law in this booming sector will no longer wash with the taxman.”
He added: “Some assets like Black Market Pesos are almost exclusively used by organised crime but criminal proceeds flow through relatively mainstream assets like Bitcoin at a rate that some find alarming. For example, cybercriminals overseas take virtually all of their ransom payments in Bitcoin to avoid detection.
“While criminals can still choose to not declare these assets, doing so gives HMRC another opportunity to bring criminal charges against them if their forensic work finds a hidden Bitcoin wallet.”