UK Authorities Seize NFTs and Crypto Assets in a $1.89 Million VAT Fraud

In the first of its kind, the HM Revenue and Customs (HMRC) of the United Kingdom today arrested three individuals in a tax fraud case involving cryptocurrencies and NFTs.

While tax fraud arrests are usually followed by the seizure of physical properties, this is the first case where the government seized digital assets as well.

Pay Your NFT Taxes

In a report by BBC, the HM Revenue and Customs (HMRC) seized 3 digital artworks NFTs, the worth of which are yet to be declared, along with £5000 ($6,754) worth of crypto assets. However, it has not been specified which cryptocurrencies were seized. 

The HMRC stated that the defrauders involved 250 fake companies and used “sophisticated methods” in order to conceal their identities.

The tax authority further added that false and stolen identities, false addresses, pre-paid unregistered mobile phones, Virtual Private Networks (VPNs), false invoices, and the disguise of engaging in legitimate business activities were also some methods used by the arrested individuals.

The deputy director of economic crime, Nick Sharp stated that this instance:

“serves as a warning to anyone who thinks they can use crypto assets to hide money from HMRC. We constantly adapt to new technology to ensure we keep pace with how criminals and evaders look to conceal their assets”

Now even though cryptocurrencies are taxed under specified conditions in the UK, NFTs do not fall under any such regulation. Crypto assets face similar taxations as per the Income Tax rules and the Capital Gains Tax rules.

But considering this instance and the fact that as these Non Fungible Tokens (NFTs) become more and more mainstream they might soon reach a point where the UK will have to tax them as other countries have.

NFT Under Regulation

Recently the Internal Revenue Services’ Criminal Investigation’s Los Angeles field office’s Special Agent, Ryan Korner stated:

“We’re (the division) just seeing mountains and mountains of fraud in this area.”

The statement came after the division began to observe increased use of cryptocurrencies and NFTs for fraud, tax evasion, and even money laundering.

Furthermore, in order to prevent this South Korea recently laid down tax rules for NFTs where income from these NFTs exceeding 2.5 million won ($2,102) would result in a 20% tax.

Besides thanks to mainstream media giants and sports clubs propelling NFTs into the mainstream, a similar move from other countries as well might come soon.