HM Revenue and Customs arrested 3 people this week and seized 3 Non-Fungible Tokens as part of an investigation into a suspected £1.4m VAT fraud scheme involving 250 companies: as the Department steps up its mission to tackle sophisticated tax fraud in the cryptoassets sphere.
NFTs are a novel form of “virtual” asset: being unique digital tokens with no actual tangible form. They confer a novel type of ownership of a digital asset (such as an artwork; image; music etc). Each NFT has its own unique digital signature. They first appeared in 2014. In March 2021 the artist Beeple sold a digital collage of his own photographs (but not the rights to the pictures themselves) called “Everydays: The First 5,000 Days” for $69.3million. They can be bought and sold using either crypto or traditional currencies. The market for NFTs grew to an estimated $22bn (£16bn) last year.
HMRC’s criminal tax investigators seized 3 digital artwork NFTs along with other crypto-assets worth £5,000 this week, as part of Court Order approved search and seize operation – which also resulted in the arrest of three individuals. They are suspected of an attempted £1.4m VAT fraud involving 250 fake companies. This is the first time a UK law enforcement agency has seized an NFT.
HMRC’s Deputy Director of Economic Crime, said “Our first seizure of a Non-Fungible Token serves as a warning to anyone who thinks they can use crypto assets to hide money from HMRC. We constantly adapt to new technology to ensure we keep pace with how criminals and evaders look to conceal their assets.” The investigators also alleged that the suspects used “sophisticated methods to try to hide their identities – including false and stolen identities”.
The authorities have had increasing worries that crypto-assets (including digital tokens) and crypto-currencies are being used by criminals to hide their illicit funds.
What does this mean for me?
If you invest in crypto-assets, or if your business accepts payments in crypto-currencies, HMRC will get information about it at some point. If you have not reported those transactions you will be investigated. In addition to any Capital Gains Tax, HMRC will want detailed information about the source of funds used to acquire the assets. If the crypto-assets were taken in payment for business supplies, then failing to report that would be tax evasion. Some investigations would be on criminal lines. You can avoid prosecution and massive penalties by making an Unprompted Disclosure.
How can Lynam Tax Disclosure Specialists help me?
We are experts in managing Disclosures to HMRC. We can help minimise the aggravation and get you the optimum result: even when you are already under investigation. The taxman’s cyber-investigation teams are dedicated specialists: so, you need dedicated experts on your side too.
For a free, no obligation, and confidential discussion, call one of our experts now:
Paul Lynam: 0845 643 9997
or
Andrew Nutbrown: 07718 778710