Last week HMRC published a report on the cryptoasset market, assessing the "uptake and understanding" of cryptoassets in the UK. Here, we look at some of the key findings and what they mean.
What is the report?
The aim of the report was to help HMRC understand the population of individuals in the UK that currently hold (or have previously held) cryptoassets. In particular, HMRC's objectives were to:
- estimate the number of people who own (or have owned) cryptoassets (collectively referred to as "cryptoasset owners" below)
- capture the demographic profile of cryptoasset owners
- measure the behaviours of cryptoasset owners as they transact in the crypto marketplace
- capture certain other contextual characteristics and attitudes.
The research for the report was conducted in 2021 by Kantar Public, with the stated aim of informing policy development by HMRC and other government stakeholders in the cryptoasset space.
Does the report confirm what we thought we knew?
In some respects, yes. The report confirms the growing popularity of cryptoassets – 10% of UK adults own or have owned cryptoassets, and 68% of those are "likely" or "very likely" to acquire more.
It confirms some accepted demographic characteristics of cryptoasset owners – 76% are under the age of 45 (compared to 45% of the general population), and 69% are male. The report also confirms accepted ideas about how people buy and sell cryptoassets – 68% of owners acquired their cryptoassets through a centralised exchange, and 81% use an exchange to make disposals.
What else?
Other statistics are more surprising. 19% of cryptoasset owners have a professional financial adviser, and 70% hold at least one other investment. 19% of respondents said that cryptoassets were a core part of their investment portfolios. These statistics indicate (if such an indication were needed) that cryptoassets are beginning to enter the mainstream and be adopted by experienced investors.
That said, only 42% of cryptoasset owners are aware that tax liabilities can arise when purchasing goods and services using cryptoassets, and only 50% that tax liabilities can arise when converting cryptoassets into fiat currency. Only 28% have seen HMRC's guidance on the tax treatment of cryptoassets, and only 16% have sought tax advice in respect of their cryptoassets. Capital gains tax (CGT) is the principal tax that will likely apply to individual investments in cryptoassets, but 59% of cryptoasset owners know little or nothing about CGT.
Where next?
HMRC has done a huge amount of work developing and publicising its views on the tax treatment of cryptoassets, and the statistics above on tax awareness indicate that there will likely be plenty more to come from HMRC in this area. Not least because, in the year prior to the survey, 63% of owners reported making a profit when disposing of cryptoassets.
The final survey question asked cryptoasset owners for a one-word description of the future of cryptoassets. In reverse order, the top five responses were: exciting, interesting, good, bright and uncertain. The report is an admirable attempt by HMRC to understand the rapidly evolving cryptoasset market, and unpick a little of that uncertainty.
