CRYPTOCURRENCY TAX
TRANSACTION TYPES
Record Keeping
One of the most important messages to come from the recent HMRC guidance is the importance of keeping records of all cryptoasset activity. Good records are the easiest way to prove your acquisition costs and cryptoasset history to HMRC.
CRYPTO10400 - Cryptoassets Manual - HMRC internal manual - GOV.UK
HMRC’s guidance on how to keep records states:
Cryptoasset exchanges may only keep records of transactions for a short period, or the exchange may no longer be in existence when an individual completes a tax return. The onus is therefore on the individual to keep their own records for each cryptoasset transaction.
Records of cryptoassets can be:
- paper (cold) wallets containing the individual’s public and private keys
- electronic (hot) wallets on devices
- other records of their transactions and balances such as downloads of their wallet activity from a cryptoassets exchange
- hardware (cold) wallets looking like a USB, containing the individual’s public and private keys.
Records must include:
- the type of cryptoasset
- date of the transaction
- if they were bought or sold
- number of units involved
- value of the transaction in pound sterling (as at the date of the transaction)
- cumulative total of the investment units held
- bank statements and wallet addresses, in case these are needed for an enquiry or review.
Cryptoassets are digital assets and as such all records in a wallet should show balances and transactions, either in full or via reference to a public blockchain.
The individual’s access to fiat currency could come from:
- the point of deposits into a bank account; and
- use of a cryptoasset Automated Teller Machine (ATM)
These are records which should also be kept and produced for an enquiry. They form part of the audit trail from acquisition to disposal and therefore evidence of any gains made.
Cryptoasset transactions usually occur on a public blockchain, so can be viewed digitally and checked using records obtained from a wallet. A link to an open source blockchain transaction and acknowledgement of the individual owning the public key involved in the transaction is a record as is a download from their wallet provider or exchange.
Cryptoassets are obtained, administered, exchanged, used and linked to fiat currency electronically or digitally. It is therefore reasonable to request electronic records with full details of transactions and any supporting valuation records for the acquisition and disposal tax points.
Exporting a copy of your data from the exchanges and wallets that you use on a regular basis is good practice. Additionally, keeping this data even after submitting tax returns for the relevant year is vital. This will help with any HMRC compliance checks, allow the calculation of pool values in future tax returns and allow cryptoasset users to adapt to any changes in HMRC’s cryptoasset tax guidance.
It is advisable to keep records after filing your tax return as HMRC may check the figures to ensure that you are paying the correct amount of tax. Using an app like Recap makes this easy!
What if I have missing records?
There are many reasons for missing data - not taking records before leaving an exchange, historical data being unavailable, exchanges closing etc. HMRC have made it clear that responsibility for record-keeping lies with the user, so you should prioritise this moving forward.
Finding missing records is tricky and there are limited ways of finding your transaction history. A couple of suggestions:
- Check bank statements for any fiat deposits or withdrawals you may have made into or out of the account
- Check through any historical data that you do have to see if you can track any movement of assets across accounts/exchanges
- Get in touch with exchanges you no longer use to request data they may still have.
Unfortunately, sometimes missing data is simply untraceable and can only be identified as such.
You can create a custom account within the Recap app and try to collate the missing transactions from memory and using the hints above. You may get warnings of missing acquisitions which you would need to add manually.
If you have lost, stolen or destroyed data you can provide estimated figures whilst you collate more accurate records, but you need to tell HMRC this when filing your tax return
Last modified 5mo ago
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