Founder of Himalaya Exchange William Je on Taxation for Cryptocurrency Investors

On May 24, Bloomberg Tax published an article on cryptocurrency taxation by William Je, the CEO of Hamilton Investment Management Ltd, and the founder of Himalayan Exchange. In the article, he prompted cryptocurrency investors to be mindful of tax implications and keep all transaction records for the purpose of staying compliant and to avoid unnecessary penalties as the UK tax authority is scrutinizing.

Mr. Je noted that the UK tax authority is scrutinizing investors holding cryptocurrency assets. The UK tax authority HM Revenue & Customs (HMRC) is reported to be working alongside leading cryptocurrency exchange platforms to gather personal information of users; and investors need to be mindful of tax implications that can occur when dealing with cryptocurrency assets.

Mr. Ye said anyone investing in cryptocurrency needs to be careful when calculating the profits/losses arising from the disposal of cryptocurrencies. A disposal for UK tax purposes may occur if cryptocurrencies are sold for cash, used to buy other assets with a value, or exchanged for another cryptocurrency. By way of example, if you have exchanged a token from one platform to another platform, for example Bitcoin to Ethereum, this would be a disposal for UK capital gains tax purposes and a re-purchase at the market value at the date of the new token.

The founder of Himalaya Exchange also highlighted that keeping accurate records is very important, because some individuals may trade very frequently, also cryptocurrency exchanges may only keep records of transactions for a short period, or the exchange may no longer be in existence when an individual comes to evaluate the position.

Therefore, it is advisable that records be saved by investors as soon as possible. Mr. Je commented that individuals must keep a record of the type of crypto asset, the date of the transaction, if cryptocurrency was bought, sold or exchanged, the number of units involved, the value of the transaction in pounds sterling (this is the market value in pounds sterling at the date of the transaction), the cumulative total of the investment units held (as well as the cumulative cost) and bank statement and wallet addresses, in case these are needed for an enquiry.

The UK tax authority HMRC will pursue those persons who fail to report their profits correctly. Penalties for failing to report gains can be quite severe.