Crypto assets and your tax return: substantiating origin for the tax office

How does crypto end up on your tax return?

For most individuals, Capital Gains Tax can apply when you sell, exchange, spend or give away crypto and make a gain. HMRC expects you to keep your own records of each transaction, including the date, the amount, the value in pounds and the cost. That is set out on the GOV.UK page on tax when you sell cryptoassets.

How you complete your return and what you owe are tax questions for you and your adviser. Paucitas provides the facts that the return relies on.

Crypto on your tax return: 4 things HMRC may ask to see

If HMRC asks you to back up your figures, it usually comes down to these four things:

• Where your crypto is held: exchanges, your own wallets and any hardware wallet, with the addresses.
• The balances per wallet and per coin, backed up by the transactions over time.
• The value in pounds at the relevant dates, with the price source.
• The origin: purchases, deposits from your bank account or the moment the holdings came about.

Each point looks simple. But if you have several wallets, moved crypto between your own addresses or need to go back years, it soon gets complicated. Separate exports and screenshots often do not line up. Which documents help further is explained in the crypto tax file.

Already received a letter? Let Paucitas take a look with you. You can ring at any time, 24/7, on +31 20 244 5774.

HMRC is asking where my crypto came from. What now?

Then HMRC wants to be able to follow how your wealth was built up. It is the same asset verification a bank or mortgage lender may ask for: not a judgement, but a story that adds up. Paucitas traces the transactions back from your current holdings to the moments of purchase or receipt, and links them to bank deposits and exchange purchases.

The result is a gap-free account of the origin of your assets. Missing records, for example because a platform no longer exists? That happens a lot. Bank statements, your inbox and the blockchain itself are still there, and often they complete the picture.

Backing up or advising: what does Paucitas do?

Backing up means making facts checkable: which holdings you had, what they were worth and where they came from. Advising means deciding what those facts mean for tax. Paucitas does the first. HMRC decides the tax, and your adviser represents your position. With a clear, independent basis your adviser has more to work with, and questions are often answered faster.

Separate exports from different exchanges, in different formats, cost your accountant time. Paucitas brings everything together in one overview. How we approach crypto wealth more broadly is explained in mapping out crypto assets.

Who helps back up crypto for HMRC?

Paucitas. We work everything out for you: the transactions, the balances and the route of the money. We also go through documents, emails and other communication, so that a complete picture emerges, with a timeline and where each part of your assets came from, step by step. Paucitas does all tracing itself, without tracing tools. You receive a report that anyone can follow and understand step by step, including your accountant.

• No tax advice: Paucitas provides the evidence; your return is done by you or your adviser.
• Costs: every investigation is tailored. You receive a bespoke quote in advance, which we go through together, with no surprises.
• Turnaround: from the same day to around two weeks.

Is part of your crypto on a wallet you can no longer fully access? Then Paucitas looks at whether regaining access is technically possible, only for a wallet you are the rightful owner of. We never ask for your seed phrase of our own accord.

Further reading: proving the origin of assets and who can help prove the origin of crypto.

Want to know what is still missing? Get in touch for a free intake, or ring +31 20 244 5774.

Source: GOV.UK, check if you need to pay tax when you sell cryptoassets.