30 May 2022general
Despite the very recent setbacks, the rise of digital currency and blockchain is inexorable. Individuals and businesses are increasingly engaging with cryptocurrencies and blockchains, both as an investment or a ‘use case’ in their business and there is a clear distinction between crypto investment and blockchain capability in business.
The Bank of England (BoE) is considering a central bank digital currency and the Treasury recently announced it wants to make the UK a global crypto hub, with a first step in regulating stablecoins, despite the reticence from the regulators. According to research, 19% of people in the UK have bought cryptocurrencies before and millions currently own crypto, although the level of understanding about them and their taxation is variable.
For crypto, currently, it’s a bit of a financial ‘wild west’ that needs taming. BoE Governor Andrew Bailey advises: “It is essential that we ask the difficult and pertinent questions when it comes to the future of these new forms of digital money.”
Globally, the international Financial Stability Board of G20 members is looking at how to regulate cross-border cryptocurrency activity. The taxman isn’t far behind the regulation, with the issue of the cryptoasset manual in 2018 and tax information exchange agreements making serious holders of crypto much more visible to them.
Tax liabilities on digital assets
“HMRC is consulting with cryptocurrency exchanges to identify who holds significant amounts and may not have disclosed tax liabilities. Currently, HMRC appears happy offering a ‘window of opportunity’ for people to voluntarily disclose historic tax liabilities on their digital assets. That window won’t be open indefinitely before HMRC starts to impose significant penalties for late notification of tax,” warns Sharon Omer-Kaye, a Partner at James Cowper Kreston (JCK) who joined the firm in November 2021 to lead its growing private client practice.
“Since 2020, HMRC has listed cryptoassets as an asset class on page two of its tax return guidance notes, highlighting it’s growing focus on this area, probably aligned to the significant growth in crypto uptake and value in 2020. The US tax authority, the IRS, has similarly highlighted cryptocurrency disclosure in the front of US tax returns,” she notes.
Understanding the risks and rewards
Sharon Omer-Kaye is a UK tax adviser in cryptocurrencies and blockchain. “Many financial professionals think the whole cryptocurrency and blockchain area is too difficult and niche to try to understand, so choose to ignore it,” she says.
“We are building expertise across our service lines so that JCK is well-equipped to advise individuals and businesses across the spectrum from the tax implications of personal or corporate investments, to start-ups owning and ‘trading’ in digital assets, the global structuring and accounting issues for crypto businesses among others.”
As with any other types of asset, investors and businesses need to be aware of the risks, as well as the benefits, in this space, she urges:
“You need to be clear on your risk tolerance and to approach investment in cryptocurrencies as you would other types of investment, being prepared for higher, quicker volatility and reduced financial protection.”
Alongside crypto investing, businesses are increasingly looking to blockchain to solve challenges such as supply chain management, food provenance and audit trails among others. She cites the example of the rural and agribusiness sector. “Blockchain can be used to trace goods around the world, with real-time traceability which cannot be altered in the same way that manual systems can,” she said.
She adds that major global companies and investment houses are investing in and interacting with cryptocurrencies.
Private client expertise
In the age before digital currencies, Sharon Omer-Kaye’s accountancy career began with HMRC in London before she moved to the Thames Valley and into private practice, eventually to RSM UK. Her focus has always been on private clients, trusts and the rural sector, across the UK and overseas, as well as running RSM’s Swindon office.
“I like the intellectual challenge of tax legislation and problem-solving for clients,” she said. “It’s a joy being able to move your clients forward. They come to you with a challenge and you help them find the solution.”
Looking for new challenges as well as a move away from a large corporate partnership, she joined JCK. “I wanted to be in a partnership where I can help shape the future business and to have greater control over my destiny,” she said.
JCK’s private client and expat team, of nearly 40 people across four locations, provides advice on inheritance tax and trusts, wealth reviews, business exits, property structuring, global tax planning, tax enquiries, philanthropy, tax-efficient investments, remuneration and benefits planning. There’s a global dimension to private client work and her team can draw on JCK’s international network to support clients’ needs.
Fit for business
Outside work, the self-confessed “Peloton evangelist” finds time spent on indoor exercise at home, which began during the pandemic lockdown now suits her work/life requirements.
As well as balancing commitments to her own family, JCK’s ‘family’ partnership culture was another attraction that drew her to the firm. It’s a philosophy she is keen to share with clients.
“With our 100-year history, JCK is a strong, stable and fiercely independent business. Clients know they can easily access talented people here knowing we’re unlikely to be swallowed up at a later stage by a large firm. JCK is growing not just for the sake of growing, but to enable us to continue servicing our clients with excellent people, ideas and solutions in a personal way.”
What should businesses be thinking about right now?
Sharon Omer-Kaye advises: Assess how technology will affect your future, for example, cryptocurrencies, blockchain, artificial intelligence, drones and robotics, as well as the skills your workforce will need to feel comfortable with new technology.
Advice you’d give to businesses
Don’t get stuck in the weeds by failing to look up. Step back and analyse what should be your key areas of focus. Sometimes people are so busy running their business that they don’t focus on their wider priorities and their reasons for being in business.
Best advice you’ve received
In your career, be in control rather than waiting for others to set your direction. Make sure you look after yourself so you can be the person you want to be – for both your business and your family.
James Cowper Kreston provides audit, accounting and tax work along with a range of business advisory services, from offices in Newbury, Oxford, Reading, Southampton and London.
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