It may sound like a sensational sci-fi script, but with crypto-currencies growing in adoption and being used in an increasing variety of ways, questions are being asked by accountants about how they should account for crypto gains (and losses!).
In The Accountants Club, a recently launched community where accountants share knowledge, best practices and ideas, the topic has started to gain momentum recently. Comments included a number saying they were seeing far more enquiries in relation to cryptocurrency and expected to see that increase.
Tax rules are still evolving around cryptocurrency as well as another emerging area, NFTs (non-fungible tokens). Large fluctuations in price, the complexities around valuations and high transaction frequencies all combine to create challenges for taxpayers and their advisors.
Here are three recommendations for accountants facing questions around cryptocurrency and related assets:
- Check out HMRC’s first manual on the taxation of cryptoassets. It’s pretty clear, and HMRC is trying to be pragmatic in their approach rather than making up new rules for this area.
- Encourage rigorous record keeping. That’s always been a mantra of accountants, of course, but when crypto-customers may be doing multiple transactions a day and hundreds or thousands in a year, they are expected to hold details of every one. Even just a spreadsheet detailing their activities and transactions would be a pre-requisite.
- Prepare a strategy for cryptocurrency in your firm, with clear guidelines for your colleagues and communications on your capabilities. Those firms who present themselves as specialists could develop an important business line to help grow their business.
Ultimately, this is ‘just another tax issue’, but undoubtedly it’s potentially complex. However, grasping the initiative and promoting your capabilities in this area could help position you as a firm that is at the leading edge of tax and compliance, and so benefit your wider business.
After all, who wouldn’t want a crypto-accountant on their side!