Cryptocurrency has moved firmly into HMRC’s spotlight. In 2026, HMRC has significantly expanded its data-gathering powers, particularly around crypto exchanges, wallets, and offshore platforms.
If you have undeclared crypto gains and receive a COP9 (Code of Practice 9) letter, HMRC suspects deliberate tax fraud — not an innocent mistake.
This guide explains how crypto gains trigger COP9, what HMRC is looking for, and how to protect yourself.
Why HMRC Is Targeting Crypto in 2026
HMRC now receives extensive information from:
- UK and overseas crypto exchanges
- Banking transaction monitoring
- International data-sharing agreements
- Blockchain analytics tools
Many taxpayers wrongly believe crypto is “anonymous”. In reality, HMRC can trace transactions back to individuals.
Common crypto activities under scrutiny:
- Undeclared capital gains on crypto trading
- Crypto-to-crypto trades not reported
- Staking, DeFi, and yield farming income
- NFT trading profits
- Offshore wallets and exchanges
How Crypto Issues Lead to a COP9 Investigation
HMRC issues a COP9 letter when it believes tax irregularities were deliberate rather than accidental.
Red flags that trigger COP9:
- Large or repeated crypto gains with no tax reporting
- Movement of funds between wallets and offshore exchanges
- Conversion of crypto to fiat without declaration
- Discrepancies between bank deposits and tax returns
Once COP9 is issued, HMRC offers a choice:
- Make a full voluntary disclosure, or
- Risk criminal investigation
What HMRC Expects in a Crypto COP9 Disclosure
A crypto-related COP9 disclosure must be complete, accurate, and well-documented.
HMRC expects disclosure of:
- All crypto wallets (current and historic)
- Exchange accounts (UK & overseas)
- Full transaction history
- Capital gains calculations
- Income from staking, mining, airdrops, or DeFi
- Fiat conversions and withdrawals
Partial disclosure can result in withdrawal of COP9 protection.
Common Crypto Disclosure Mistakes Under COP9
1. Assuming HMRC Can’t See Offshore Wallets
HMRC routinely accesses international data and blockchain intelligence.
2. Ignoring Crypto-to-Crypto Transactions
Crypto swaps are taxable events, not loopholes.
3. Poor Record-Keeping
Missing transaction data raises red flags and delays settlement.
4. Self-Reporting Without Expert Support
Incorrect explanations or figures can worsen your position.
Penalties for Undeclared Crypto Gains
Under COP9, penalties can be severe:
- Up to 100% of tax due (UK assets)
- Up to 200% for offshore matters
- Interest and extended investigation timelines
Early professional disclosure can significantly reduce penalties.
