Cryptocurrency Disposal - Tax options?

[rothko13]

I'm UK resident and looking for options for disposing of some crypto. At the beginning it was a split investment with a friend where we bought BTC together right at the low (Nov 2015) around $300 each... That was at a later stage converted into ETH and what was a $15k investment on my part snowballed into about $250k.

Now, the issue is the original BTC was acquired in cash by my friend in brazil (using Local Bitcoins site). My worry is if I declare the capital gains in the UK and HMRC decides to take a look at it. I would have a hard time explaining the cash purchase as we don't have a receipt for the original purchase. I also can't show that the 15k left my UK accounts as I had money sitting in a brazilian bank account and didn't use money from here.... all in all I think it could be complicated in the UK even though my household income hasn't been bad for the last 5-6 yrs... I would love to hear from someone who understands the UK tax system if they have any ideas on how to make it work.

Now, as a second option I have been thinking about moving to Cyprus as they only charge capital gains on immovable assets. Would it be fine if I disposed of such coins as a Cyprus resident in the future? and is it likely for the Cypriot authorities to raise any questions about such assets being disposed while residing there?

I'm pretty sure the crypto market will keep growing over the next yr or 2. So my numbers could get a lot higher, hence my worry.

Thanks in advance for you help

 

[rothko13]

Anyone guys?
Cyprus specialists maybe, with any knowledge of cryptocurrency as a Cyprus resident?

Appreciate it

 

[laurie]

I'm in the same situation. I think it's better to justify that you get this ETH or Cash.

You would move in Cyprus for 7 months in 2018 in order to be resident and declare your capital gain that you could still have to justify how you acquired this capital. It's certainly in your interest to take holidays in Malta, Portugal, Cyprus, Mauritius, a Caribbean Island, Belize, Panama. Still I would subject you to :
- Get all justifications ready (Blockchain history of your BTC wallet and purchase of ETH being by FAR more important that the 15k cash you spent in Brazil 2 year before)
- Think which bank/jurisdiction you will use to Cash/Out your funds. Your UK bank monitored by HMRC ? An offshore bank that may freeze your assets until you have the sufficient justification.

Well think how you can either justify your ETH or Cash. I may know people who would help you but they would charge.
I bough 20k AUD worth of BTC when they rated 600AUD (they worth 5800AUD now...)

 

[mnschwarz]

First off, talk to a local professional. Secondly, don't sell your crypto til you have this figured out. I agree it will continue to grow; at the very least you shouldn't go backwards, But a capital gain is deemed to occur when you realise the profit. This means if you sell your ETH, even for a second to buy more (trading) or to change to either bitcoin or whatever, that is when the capital gain is deemed to have occurred. You technically already have a capital gain that should have been reported when you swapped from BTC to ETH.

If you have plans to move and legally become resident of a low tax jurisdiction, that could be a great time to take the profit. Again, check with your local professional.

As for proving the initial purchase should it be required, it sounds like you have a record? The cash was withdrawn from your Brazilian bank account? Bank summary etc would confirm this alongside a purchase of crypto. Worst case, draw up a backdated contract with your friend to document the transaction perhaps.

All in all though, if you bought with cash, have never taken the funds back home or declared your crypto activities... I would probably keep it quiet. Let your crypto continue to grow and just withdraw small amounts. Don't go drawing attention to yourself etc. If you end up mega wealthy, move overseas and take the funds when you want to get out. You could even look at an offshore structure to take the profits in future if you don't want to move. None of it is technically legal but should be under the radar at least.