HMRC will hold Bitcoin as part of plans to confiscate crypto from tax evaders

HMRC is looking at introducing new rules to allow it to seize cryptocurrency when businesses fail to pay taxes.

is planning to modernise the way tax is collected at the digital age. The government is considering proposals to give tax agencies the power to access online wallets.

HMRC can already seize money from bank accounts if individuals do not pay their taxes under the “direct recovery” powers. However, it is looking at extending these powers to online payment accounts like PayPal.

HMRC’s consultation document raises the possibility that businesses could be forced to use cryptocurrency wallets in order to make payments online if virtual currency becomes more common.

Seizing cryptocurrency from wallets is seen as the latest crackdown against the sector. It has been accused by many of being a conduit for money laundering and criminal activities. Bitcoin and other cryptocurrencies have been hailed as a way to allow owners to control their finances without government interference.

While wallets operated by individuals are only accessible by their owners, those on centralised online exchanges like Coinbase, Binance, and Kraken may be affected by these rules.

When they detect criminal activity, law enforcement agencies can seize cryptocurrency from these exchanges.

A HMRC document on consultation says: “If more regulation is introduced around digital currencies, cryptocurrency wallets could become a popular way to pay for goods and service.”

The article added that it was “unclear how easy this could be because of the fluctuating values of cryptocurrency”.

The Government has said that it will proceed with giving HMRC the power to seize money from digital wallets. However, it is not clear if this includes cryptocurrencies.

HMRC’s spokesman stated: “The proposals are designed to ensure that HMRC’s collection of debt keeps pace with the business practices. E-commerce is a new way of doing business, with less physical assets and owned assets in the UK. This makes it difficult for HMRC’s existing powers to collect unpaid tax.

The responses to the consultation will help the Government engage in additional analysis and engagement with the proposals.

All of HMRC’s powers are balanced with safeguards. This should reassure the taxpayers that their powers are used proportionately and consistently.

The police have seized hundreds of millions pounds worth of cryptocurrency that was linked to criminal activities, and often sold it at auction.

HMRC announced recently that cryptocurrency would be added to the self-assessment tax returns. Forecasters estimate that it will result in an additional PS10m per year of capital gains tax on profits not reported currently.