--- title: "HMRC Has Opened a Compliance Check Into My Crypto Gains: What Should I Do Before I Reply?" url: https://taxdisputes.co.uk/2026/10/hmrc-has-opened-a-compliance-check-into-my-crypto-gains-what-should-i-do-before-i-reply/ date: 2026-10-30 modified: 2026-10-30 lang: en author: "Tax Dispute Solicitors" description: "If HMRC has opened a compliance check into your crypto gains, it almost certainly holds exchange data before it writes to you. The reply you send first sets the figures HMRC works from, shapes how it views your behaviour and decides how large any penalty will be." categories: - "Capital Gains Tax" - "Compliance" - "Crypto" - "HMRC" - "HMRC Assessments" - "Non-compliance" - "Report on HMRC" - "Tax Investigation" - "Tax Issue" - "Tax Law" tags: - "30 day rule" - "CARF" - "COP9" - "crypto tax" - "cryptoasset Capital Gains Tax" - "Cryptoasset reporting framework" - "discovery assessment" - "HMRC crypto compliance check" - "HMRC crypto enquiry" - "HMRC nudge letter crypto" - "same day rule" - "Schedule 24 Finance Act 2007" - "Schedule 36 Information Notice" - "Schedule 41 Finance Act 2008" - "section 104 pooling" - "TCGA 1992" - "Voluntary Disclosure" image: https://taxdisputes.co.uk/wp-content/uploads/2026/10/Bitcoin-Coin-in-a-Luxurious-Study-1024x576.png word_count: 1967 --- # HMRC Has Opened a Compliance Check Into My Crypto Gains: What Should I Do Before I Reply? ***If HMRC has opened a compliance check into your crypto gains, it is looking at whether you have declared and paid the right Capital Gains Tax and Income Tax on your cryptoasset disposals, and it almost certainly holds exchange data before it writes to you. The reply you send first matters more than any letter that follows. It sets the figures HMRC works from, shapes how HMRC views your behaviour and decides how large any penalty will be.*** ### Want legal advice from Tax Solicitors on your case? Our simple enquiry form goes immediately to our tax litigators in Middle Temple, London. Call us on +442071830529 from 9am-6pm. [Check My Case Now ✔](https://taxdisputes.co.uk/legal-case-assessment/) Most people who receive this letter have one of three problems. Some never reported crypto at all. Others reported some disposals and missed swaps, staking rewards or a second exchange. A third group reported carefully but cannot prove their costs because an exchange has closed or their records are incomplete. Each can be dealt with, and the work you do before you reply is where most of the money is saved or lost. Our guide to [HMRC compliance checks, their powers and how to respond](https://taxdisputes.co.uk/2026/03/hmrc-compliance-checks-powers-rights-and-how-to-respond/) covers the process in general terms. ## Nudge Letter or Compliance Check? Find Out Which You Have Many people search for help with a "crypto compliance check" when they have received a nudge letter. A nudge letter is a standard letter sent to large numbers of people, telling them HMRC holds information about their cryptoassets and inviting them to check their returns. It has no formal legal force, although ignoring it often leads to a formal check. Our guide to [HMRC nudge letters](https://taxdisputes.co.uk/2025/07/hmrc-nudge-letters-explained-expert-legal-guidance-for-taxpayers/) explains how to deal with one. A compliance check is addressed to you personally, names an officer and identifies the tax years under review. Where you filed a return, HMRC will usually say it is opening an enquiry under section 9A of the Taxes Management Act 1970. Where it believes tax was missed in an earlier year, it may raise a [discovery assessment](https://taxdisputes.co.uk/2026/05/hmrc-discovery-assessments-explained/) instead. If the letter mentions Code of Practice 9 or the Contractual Disclosure Facility, HMRC suspects fraud and you are in a different process with a 60 day deadline, explained in our guide to [COP8 and COP9 investigations](https://taxdisputes.co.uk/2026/01/how-to-respond-to-cop8-cop9-hmrc-tax-investigations-2026-guide/). If you are unsure which letter you have, our page on [understanding HMRC letters](https://taxdisputes.co.uk/2026/04/understanding-hmrc-letters/) will help you identify it. ## Why HMRC Already Knows About Your Crypto HMRC has collected customer data from UK exchanges for several years using its [powers to gather information from third parties](https://taxdisputes.co.uk/2020/10/hmrc-to-gain-further-powers-to-gather-information-from-third-parties/). That flow has now been formalised. Under the Cryptoasset Reporting Framework, reporting platforms must collect user and transaction data for every calendar year from 1 January 2026 and send the first annual report to HMRC between 1 January and 31 May 2027. The rules cover UK resident users as well as those resident in other participating countries, so overseas exchanges will increasingly report to HMRC through information exchange. Assume HMRC can see when you bought, sold and moved assets across the platforms where you hold an account. What it often cannot see is the full picture: your costs, transfers between your own wallets and activity in self custody. That gap is where your reply does its work. It is the same approach HMRC has taken with [online marketplace sellers](https://taxdisputes.co.uk/2025/03/hmrc-cracking-down-on-online-marketplace-sellers/). ## Do Not Reply With Estimates The most expensive mistake at this stage is sending HMRC a quick figure to make the problem go away. Exchange data typically shows sale proceeds and not your acquisition cost. If you cannot evidence your costs, HMRC may treat far more of the proceeds as gain than is correct. A transfer from an exchange to your own wallet can also look like a disposal when it is not one. A figure you give early is hard to withdraw, and a figure later shown to be wrong can be used to argue that you were [careless or worse](https://taxdisputes.co.uk/2026/01/hmrc-behaviour-assessments-careless-deliberate-or-concealed/). Tell HMRC in writing that you are gathering your records, and ask for more time if the deadline is too short to produce accurate figures. HMRC officers routinely agree reasonable extensions where the request is made before the date passes. Our guide on [what to do after receiving an HMRC letter](https://taxdisputes.co.uk/2026/03/received-an-hmrc-letter-what-to-do-next/) covers the first steps. ## Rebuild Your Figures the Way HMRC Will HMRC calculates crypto gains using the share matching rules in the Taxation of Chargeable Gains Act 1992. Tokens of the same type are held in a single pool under section 104, with one pooled cost. Before that pool is used, acquisitions on the same day as a disposal are matched first under section 105, and then acquisitions in the 30 days after a disposal are matched under section 106A. Exchange statements alone do not produce this calculation, which is why many self prepared figures are wrong. Non fungible tokens are separately identifiable and sit outside the pooling rules. Before you reply, collect every exchange export, wallet address, bank statement showing money in and out, and any records from closed platforms. Swapping one token for another is a disposal, as is spending crypto or giving it to anyone other than your spouse or civil partner. Staking rewards, airdrops and mining receipts may be taxed as income when received, and then again as a gain when sold. If the reconstruction shows an error in your favour, that belongs in the reply too. ## Look Beyond the Years HMRC Has Asked About A compliance check usually names one or two tax years, but your crypto history probably does not stop there. HMRC can ordinarily assess four years back, six where an underpayment was careless and 20 where it was deliberate, under sections 34 and 36 of the Taxes Management Act 1970. If your records show problems in other years, deal with them now. Disclosure made after HMRC has opened a check is treated as prompted, but a disclosure that is complete when first made still earns better penalty treatment than one HMRC has to extract year by year. Our [voluntary disclosure guide](https://taxdisputes.co.uk/2026/02/voluntary-disclosure-2026-guide/) and our article on [reducing penalties and prosecution risk](https://taxdisputes.co.uk/2025/10/voluntary-disclosure-to-hmrc-reducing-penalties-and-prosecution-risk/) explain how disclosure works. ## How Your Behaviour Decides the Penalty Penalties for an inaccurate return are charged under Schedule 24 to the Finance Act 2007, at up to 30% of the extra tax where you were careless, 70% where the error was deliberate and 100% where it was deliberate and concealed. Where you never notified HMRC that you had gains to report, a similar regime applies under Schedule 41 to the Finance Act 2008. HMRC reduces the penalty for [telling it about the problem](https://taxdisputes.co.uk/2025/10/voluntary-disclosure-to-hmrc-reducing-penalties-and-prosecution-risk/), helping it quantify the tax and giving it access to records. In a prompted case the minimum is 15% of the tax for careless errors, 35% for deliberate errors and 50% where the error was deliberate and concealed. The category HMRC chooses has the biggest single effect on what you pay, and it also controls how far back HMRC can go. Not understanding pooling or believing that crypto was untaxed until cashed out is often an honest mistake, and the facts need to be put to HMRC properly. Our guides to [careless, deliberate and concealed behaviour](https://taxdisputes.co.uk/2026/01/hmrc-behaviour-assessments-careless-deliberate-or-concealed/), [HMRC penalties](https://taxdisputes.co.uk/hmrc-penalties/) and [penalty suspension](https://taxdisputes.co.uk/2026/09/hmrc-penalty-suspension-how-to-avoid-paying/) for careless errors explain the arguments. ## What You Must Hand Over, and What You Can Question An opening letter usually asks for information informally. If you do not cooperate, HMRC can issue an information notice under Schedule 36 to the Finance Act 2008, which can carry a £300 penalty and further daily penalties of up to £60 if ignored. The notice is limited to information and documents reasonably required to check your tax position, and you can usually appeal against parts that go further than that, unless they relate to your statutory records. Our guides to [Schedule 36 notices](https://taxdisputes.co.uk/2026/03/schedule-36-notices-explained-your-rights-and-obligations/) and to [how much you must disclose](https://taxdisputes.co.uk/2026/09/hmrc-information-requests-and-how-much-you-must-disclose/) set out the limits. Be careful with explanations. A covering letter that guesses at why figures were left out can become evidence of your state of mind. Advice from a lawyer on your position is protected by legal professional privilege. Working papers and reports from an accountant usually are not, as our article on [accountants' reports and privilege](https://taxdisputes.co.uk/2020/10/high-court-re-confirms-accountant-consultant-reports-are-not-protected-by-litigation-legal-privilege-disclosure-hmrc-advice/) explains. ## Mistakes to Avoid Before You Reply Do not move assets to another platform or overseas wallet, close accounts or delete exchange histories after the letter arrives. HMRC may treat any of these as concealment, and they will damage your credibility in any later negotiation. Avoid answering an officer's questions by phone without preparation. If HMRC proposes a meeting, read our page on [HMRC interviews](https://taxdisputes.co.uk/hmrc-interviews/) first. Diary the reply date on the day the letter arrives, and check whether anything else has a deadline. Our page on [HMRC tax investigations](https://taxdisputes.co.uk/hmrc-tax-investigations-solicitors-london/) covers how these cases usually progress. ## If HMRC's Figures Are Wrong At the end of an enquiry HMRC issues a closure notice amending your return, and any assessment or penalty can be appealed, usually within 30 days. You can ask for an [internal review](https://taxdisputes.co.uk/hmrc-internal-review-appeals-solicitors-london/), try [alternative dispute resolution](https://taxdisputes.co.uk/2026/08/alternative-dispute-resolution-with-hmrc-explained/) or take the case to the [First-tier Tax Tribunal](https://taxdisputes.co.uk/first-tier-tax-tribunal-solicitors-london/). Crypto cases are often won or lost on whether the tribunal accepts your reconstruction of costs, so the evidence you gather before your first reply is what supports any appeal. Our guide on [late appeals](https://taxdisputes.co.uk/2026/09/late-appeals-against-hmrc-is-it-too-late/) applies if a deadline has already passed. If the tax is due and you cannot pay at once, our guide to [time to pay arrangements](https://taxdisputes.co.uk/2026/04/hmrc-time-to-pay-arrangements-explained/) explains how to spread the payments. An unpaid debt can lead to enforcement and, for individuals, a bankruptcy petition, as explained in our guide to [whether HMRC can make you bankrupt](https://windinguppetitionsolicitors.co.uk/can-hmrc-make-me-bankrupt-directors-sole-traders-bankruptcy-risks-explained/). ## When the Problem Started With Your Adviser If an accountant or tax adviser prepared your returns and told you crypto did not need reporting, or applied the matching rules wrongly, the penalties and interest you now face may be recoverable from them. Our guides on [compensation from negligent accountants and tax advisers](https://professionalnegligenceclaimsolicitors.co.uk/compensation-negligent-accountants-financial-tax-advisors/) and on [claims for negligent tax advice](https://taxdisputes.co.uk/professional-negligence-negligent-tax-advice-sue-accountant-claims/) explain the claim. Limitation periods apply, so keep the adviser's emails and engagement letter. ## How We Can Help We act for investors, traders and founders facing HMRC compliance checks into cryptoassets, and we take over correspondence with HMRC so the letters come to us. We review the opening letter, rebuild your gains under the matching rules from exchange and wallet data, prepare a complete disclosure, argue for the correct behaviour category and penalty reduction, respond to Schedule 36 notices and COP9 letters, and appeal to the tribunal where HMRC's figures are wrong. We do not offer free legal advice or legal aid, and we generally take on substantial matters. More on our tax work is on our [taxation solicitors](https://lexlaw.co.uk/practice-areas/taxation-solicitors-london/) page. LEXLAW is a firm of dual qualified solicitors and barristers with chambers in Middle Temple, next to the Royal Courts of Justice. We offer a fixed fee advice conference with both a solicitor and a barrister, so you understand your exposure before you reply to HMRC. What you tell us is confidential and protected by legal professional privilege. Start with our [case assessment form](https://taxdisputes.co.uk/legal-case-assessment/), which goes directly to our tax litigators. ## Our ⭐⭐⭐⭐⭐ Client feedback: - ## 4 Year HMRC Battle Resolved > "Many thanks to the Tax Team who helped me navigate out of a four year battle with HMRC. Living abroad was a barrier in dealing with HMRC and it was immensely frustrating before I found LexLaw. Great communication, very knowledgeable, upfront in regards to cost and worth every penny in my opinion. 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The opening letter gives a date, often around 30 days. Ask for an extension in writing before that date if you need time to produce accurate figures. Is moving crypto between my own wallets a disposal? No. A transfer between wallets you own is not a disposal, but HMRC may not be able to see that from exchange data, so you need to show the link between the two addresses. What if my exchange has closed and I cannot get my records? Use bank statements, blockchain records, emails and any exports you saved to rebuild your costs. HMRC expects a reasonable, evidenced reconstruction, and you should explain how you produced it. Can I still use HMRC's online crypto disclosure service? Once HMRC has opened a check, any disclosure is usually made to the officer dealing with your case, and it will be treated as prompted. Will HMRC prosecute me for undeclared crypto? Most crypto cases are dealt with as civil matters. The risk of a criminal investigation rises where HMRC suspects deliberate concealment, which is why the first reply needs care.