HMRC has published its views on the taxation of cryptoassets, and those views are increasingly being applied — often mechanically — by exchanges, software providers, and advisers. For many individuals, this has resulted in outcomes that bear little resemblance to economic reality, and in some cases, significant and unexpected tax exposure.

A recurring issue arises from the assumption that all movements between digital assets constitute taxable disposals.

Individuals may find themselves facing substantial capital gains liabilities in a year where an asset was exchanged for another digital asset that subsequently collapsed in value, leaving no proceeds and no realised loss to offset. The tax liability, however, remains.Similarly, staking rewards are often treated as income by default, based on headline valuations at the time of receipt. Where values later fall sharply — sometimes in a subsequent tax year — individuals can be left with income tax charges on amounts that no longer reflect their actual wealth.

For non-UK domiciliaries, further complexity arises around the situs of cryptoassets. HMRC’s published view can lead to inadvertent remittances where individuals had no intention of bringing foreign income or gains into the UK. In practice, the correct analysis may not always be straightforward and can depend on facts that are often overlooked.

Compounding these issues is the growing level of information sharing by exchanges. Many individuals are encountering HMRC enquiries triggered by third-party data, often based on simplistic assumptions about disposals, income, and location of assets. Once an enquiry is opened, unwinding these assumptions can be difficult, particularly where returns were prepared without adequate disclosure.

None of this is to suggest that cryptoassets are outside the scope of tax. Rather, the issue is that a simplistic application of guidance does not adequately address the legal and factual nuances involved. In some cases, the correct treatment may differ from HMRC’s stated position, but adopting a contrary view requires careful analysis and, often, robust disclosure to protect against future challenge.

For those holding or transacting in digital assets, the risks are no longer theoretical. They are immediate, practical, and often costly. Proper advice in this area requires not only technical understanding, but an appreciation of how HMRC enquiries unfold in practice and the long-term consequences of positions taken today