In this article, Head of Family Teena Dhanota-Jones examines how cryptocurrency and cryptoassets (crypto) are treated when resolving financial claims on divorce.
A client recently asked me how Bitcoin is dealt with in a financial settlement on divorce. This is an interesting question and an increasing relevant one given the rapid rise in ownership of cryptocurrency and cryptoassets (‘crypto’).
Divorcing couples are required to disclose all their assets when resolving the financial claims arising from their breakdown. Parties usually complete a financial statement (Form E), but at the moment this form does not make specific reference to the disclosure of the ownership of cryptocurrency or cryptoassets.
Interestingly, the government has obtained a foothold in this digital phenomenon and decided that on the disposal of crypto, capital gains tax may arise, and upon the receipt of crypto there may be an income tax liability. Further information about how HMRC will tax people who use crypto can be found here.
Crypto is clearly something that has a value whether received or sold. It is therefore necessary to disclose crypto within the financial disclosure process arising from the divorce/dissolution proceedings. Depending on the nature of the crypto, it can be disclosed in the Form E as an investment, property, cash digital currency and possibly even a chattel.
The valuation of crypto may fall to be determined by an expert and, unlike other assets, the valuation may occur more than once during the matter.
In summary, there is a duty to disclose crypto, provide an indication of its value, obtain a suitable tax report and update the court of any revised valuation.
If you require any further information about divorce, financial settlements on divorce or any other family matter, please contact Teena Dhanota-Jones at [email protected].
Disclaimer: The above is merely general guidance and should not be relied on as formal advice. We suggest you take professional legal advice before taking any action in relation to the issues discussed above.