UK Tax Authority Sets Sights on Crypto Confiscation

Tax-evading businesses in the UK must keep their wallets in check because authorities are targeting crypto holders who neglect their fiscal responsibilities. 

The UK’s Tax Authority is evaluating the implementation of regulations that would empower the agency to confiscate cryptoassets from businesses that have not fulfilled their tax obligations.

Now, the UK government is actively reviewing proposals to provide HM Revenue & Customs (HMRC) with the necessary authority to access custodial digital wallets. 

This initiative is part of a broader plan aimed at modernizing the tax collection process for businesses that have failed to pay taxes, a development first reported by The Telegraph. 

The possibility of increased popularity of crypto wallets as preferred means of payment for goods and services was highlighted in a consultation document dated April 27, which discussed the potential impact of added regulations on digital currencies.

If the HMRC has the ability to directly recover debts from bank accounts, it should also have the ability to do the same with digital wallets, the paper noted. This means that if someone owes taxes and has funds in their digital wallet, the agency should be able to recover the owed amount from there as well.

The Direct Recovery of Debts (DRD) legislation does not extend to digital wallets. This means HMRC currently has no enforcement powers to recover tax debts if a business has substantial funds in a digital wallet but is refusing to pay,” the paper said.

The paper also noted that it was unclear how easy it would be to consider crypto wallets due to the fluctuating value of cryptoassets.

“Given HMRC has had the power to recover established debts directly from debtors’ bank and building society accounts for 7 years, as a matter of principle, equity and fairness it makes absolute sense that HMRC should modernize their approach so that the same power exists in relation to digital wallets,” one comment from the paper said.

It’s not clear whether the authority sought would only extend to centralized entities where the individual does not control their own private key.

Non-custodial wallets are generally immune from government seizure without the consent of the owner. The HMRC said it “will consider the issues raised in relation to practically implementing this proposal in a future consultation and ensure that safeguards are taken into account in any policy development going forward.”

Meanwhile, the government said it was imperative to advance the proposal further. The next phase will involve engaging with external stakeholders, such as digital wallet operators, to gauge their interest and identify any potential obstacle that may arise during implementation. 

In a future consultation, the government plans to examine the raised concerns regarding the implementation of the proposal.

The development comes as UK crypto enthusiasts await industry-specific regulations. Andrew Griffith, financial secretary to the UK Treasury, said in a recent interview that regulations in the country are set to solidify within the next 12 months or so.

The Financial Services and Markets Bill (FSMB) is a crucial piece of legislation that will shape the forthcoming regulations for stablecoins and crypto assets. It is expected that amendments will be made to the bill, leading to heightened compliance obligations for businesses operating in the crypto space.

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