Why Accountancy Practices should be preparing to take on crypto clients
A new generation of investor is in need of help with tax compliance as both crypto adoption rate and industry regulation continue to grow rapidly.
Mon Nov 07 2022
Crypto adoption is growing fast!
Cryptocurrency has been plagued with bad press and traditionally is an area that financial services do not wish to be associated with. Many accountants avoid clients with crypto assets because of the associated risks. However, things are changing.
HMRC’s Uptake and Understanding survey, July 2022 found that 10% of UK individuals now own crypto and we expect this figure to rise as the government have now also announced their intention for the UK to become a global crypto asset hub.
The stats confirm that crypto is growing - Chainanalysis' 2022 Geography of Cryptocurrency Report shows the United Kingdom ranked 17th in the Global Crypto Adoption Index this year, up from 21st the year prior. And in terms of raw transaction volume, the United Kingdom is 1st in Central, Northern & Western Europe and 6th worldwide, with $233 billion in cryptocurrency value received from July 2021 to June 2022.
These high adoption rates and support from the UK government show that actually crypto is a serious asset class, its staying and its going mainstream.
Regulation is also growing!
Over the last two years HMRC have shown they are massively cracking down on crypto taxes, collecting information from exchanges and sending out nudge letters to users to suggest they look into their tax affairs.
Worldwide, crypto regulation is growing and jurisdictions are beginning to unite to achieve more tax transparency of crypto assets. The OECD have recently announced the Crypto Asset Reporting Framework which will facilitate the exchange of information on crypto-assets including, stablecoins, derivatives and some NFTs between jurisdictions. We expect to see this live by the end of 2023 and the underlying message is that it's time to get your tax affairs in order!
The “crypto isn’t taxable” myth
Have you ever asked a client if they own any cryptoassets? Often, crypto investors are oblivious to (or in denial of) crypto tax and do not think there is a need to declare their holdings to their accountant.
Many crypto users believe that crypto is only taxable when “cashed out” to fiat when in fact HMRC also view crypto-to-crypto trades and purchases made using crypto as a disposal. There is a lack of clarity on the rules around crypto tax and calculations are complex.
Crypto users need help
Although some crypto users may own property and have a good understanding of capital gains liability and the process of HMRC Self-Assessment, many treat crypto as passive income and because of the way PAYE works may have never actually filed a tax return.
As well as that, crypto tax guidance is cloudy, there is no standard approach to record keeping and calculating the tax is a complicated and time-consuming task that can’t be done by the average Joe.
There is a rapidly increasing need for specialist crypto tax advice and this is only offered by very few accountancy practices at the moment. Now’s the perfect time to up-skill and make your firm available and attractive to this new, younger generation of client.
Crypto is daunting but its here to stay
Cryptocurrency is reaching the mainstream and it can no longer be avoided - all accountants need at least a basic understanding of it. You can be the early bird that catches the worm by getting ahead of your competitors and start welcoming crypto clients to your accountancy practice now.
Understanding crypto is a must but the way you approach it is your decision. You could simply level up your team’s knowledge and understanding of cryptocurrency so they’re able to assist crypto clients or you could embrace crypto as an opportunity to boost your business, introducing a department of crypto tax specialists marketed towards new crypto clients.
Ready to embrace crypto? Find out how Recap can help with our Accountant Portal.