Labour says Rishi Sunak should admit Rwanda plan doubts after leaks suggest he thought deterrent ‘won’t work’
Labour says Rishi Sunak should be “honest” with the public by publishing documents which appear to show he had doubts about the Rwanda scheme to stop small boats from crossing the Channel.
Documents seen by Sky News suggest the prime minister was sceptical about government plans to send illegal migrants to the African country.
Mr Sunak expressed his doubts while he was chancellor in March 2022, shortly before the Rwanda scheme was first announced by Boris Johnson’s government.
The existence of the Number 10 briefing papers was widely reported on Saturday.
Now the Labour Party is urging Mr Sunak to “come clean”.
Watch Wilfred Frost’s live interview with Labour leader Sir Keir Starmer on the Sunday Morning With Trevor Phillips show on Sky News from 8.30am on Sunday.
Analysis:
PM facing same old problems after trying to go on offensive
The papers revealed this weekend suggest the now prime minister had particular concerns about the costs of the scheme.
It has since been made public that the government has committed at least £400m to the Rwandan government, despite not a single person being removed to Rwanda.
The papers also appear to show Mr Sunak doubted the effectiveness of his now flagship policy, saying the then chancellor believed the “deterrent won’t work”.
A government source said Mr Sunak has put the Rwanda policy at the heart of his plan for government, and as chancellor, funded the scheme.
The government’s Rwanda Bill will return to the House of Commons this month.
Shadow home secretary Yvette Cooper
Yvette Cooper, Labour’s shadow home secretary, said: “The more we hear about the government’s Rwanda scheme, the more obvious it becomes that this is an extortionate con that won’t fix the Tory chaos in our immigration system.
“The home secretary, the former immigration minister and now the prime minister clearly don’t believe the government’s plans will work.
“It’s time the Tory government was honest with the public, and publish both the papers outlining Rishi Sunak’s concerns and the full details of the cost of the scheme.
“In a few weeks’ time, the prime minister will ask his divided and sceptical backbench MPs to vote for a Rwanda scheme he clearly doesn’t believe in and which he refuses to set out the costs for.
“They should stop wasting time on this costly charade and adopt Labour’s plan to go after the criminal smuggling gangs, negotiating new security arrangements with Europe to better protect our borders and set up a new returns unit to ensure those with no right to be in the UK are swiftly removed.”
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After the reports about Mr Sunak’s doubts on Saturday, a government source said: “As chancellor, Rishi funded the Rwanda scheme and put it at the heart of his 10-point plan the month after becoming PM.
“Now he is passing the Rwanda Bill following the Supreme Court judgment to get flights off the ground.
“He is the first prime minister ever to oversee a reduction in small boat crossings, which were down by 36% last year.”
The US government is moving closer to reopening after more than 40 days of being shut down, following several Democratic lawmakers in the Senate siding with Republicans to pass a funding bill.
On Monday, the US Senate held a late-night vote for a bill “continuing appropriations and extensions for fiscal year 2026,” which passed 60 to 40 in the chamber. The bill is expected to fund the government through Jan. 31, 2026, provided it passes in the House of Representatives and is signed into law by President Donald Trump.
As Tuesday is a US federal holiday, the House is not expected to reconvene to vote on the bill until Wednesday at the earliest. Prediction platform Polymarket has already adjusted its expectation that the US government will return to normal operations on Friday, likely following the passage of the House bill.
Amid the government shutdown — the longest in the country’s history — many federal agencies have furloughed staff and reduced operations to align with the lack of funding.
Even if the bill were to immediately pass and be signed into law, it will likely take some time before staff can return to work. The operations plan at the US Securities and Exchange Commission (SEC), for example, will allow employees to come back on the “next regularly scheduled workday following enactment of appropriations legislation.”
Related: China raises alarm over alleged US role in one of the largest Bitcoin hacks
Digital asset market structure negotiations proceeding
On Monday, the leadership of the Senate Agriculture Committee released a discussion draft of a comprehensive bill on crypto market structure. The draft followed weeks of reported negotiations between Democratic and Republican lawmakers, about four months after the House passed its version of the legislation.
The shutdown likely helped slow progress on the bill, which Republican leaders initially expected to be out of the Agriculture Committee and Banking Committee by the end of October and signed into law by 2026.
Though Republicans still have a path forward to enact the legislation, North Carolina Senator Thom Tillis warned that pushing the passage beyond January or February could make the bill vulnerable amid the 2026 midterm campaigns.
Magazine: If the crypto bull run is ending… it’s time to buy a Ferrari: Crypto Kid
Key takeaways:
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Bitcoin gifts aren’t immediately taxable. The IRS treats cryptocurrency as property, so recipients generally don’t owe income tax on the gift.
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Stay within the 2025 exclusion limit. You can gift up to $19,000 per person, or $38,000 for spouses splitting gifts, without triggering Form 709.
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Recipients inherit the donor’s cost basis. Future taxes depend on the donor’s original purchase price, not the cryptocurrency’s value at the time of the gift.
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Keep detailed records to avoid IRS issues. Document the fair market value, transaction date and wallet details to make your gift audit-proof.
Bitcoin has become a popular gift for birthdays, holidays or simply to share enthusiasm for cryptocurrency. Under US tax law, gifting Bitcoin (BTC) is not an immediate taxable event. The recipient owes no income tax, and the donor typically owes no gift tax if the gift’s value is within the annual exclusion limit.
The Internal Revenue Service (IRS) treats digital assets as property, not currency. This means Bitcoin gifts fall under the same framework as stocks or real estate. They follow property rules, require valuation at the time of transfer, and may need to be reported on Form 709 if the annual exclusion limit is exceeded.
In short, you can gift Bitcoin without creating an immediate tax obligation. However, poor documentation or misunderstanding basic rules can still cause problems later.
What counts as a gift?
A cryptocurrency gift must be a true transfer of ownership. You give up control and receive nothing in return. The 2025 annual exclusion allows up to $19,000 per recipient, or $38,000 for spouses using gift splitting, without filing Form 709. Exceeding that threshold does not automatically create a tax liability, but the form must still be filed.
Gifts between US citizen spouses are unlimited. For non-citizen spouses, the 2025 limit is about $190,000. Transfers to non-residents or certain trusts may have additional requirements.
Not every transfer qualifies as a gift under IRS rules: Only those made out of genuine generosity without expectation of repayment or services.
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Paying someone’s tuition or medical bills directly is exempt from gift tax.
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Moving cryptocurrency between your own wallets does not count as a gift.
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Transfers labeled as “gifts” that are actually payments for services are treated as income, not generosity.
When Form 709 kicks in
Form 709, the United States Gift (and Generation-Skipping Transfer) Tax Return, is how the IRS tracks gifts that exceed the annual exclusion limit. Most people never owe gift tax, but some transfers still require filing.
You must file Form 709 if:
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Your gifts to any one person exceed $19,000 in 2025, the annual exclusion amount.
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You make a future-interest gift in which the recipient cannot immediately use or benefit from the asset.
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You and your spouse elect to split gifts to double the exclusion, which requires both spouses to file Form 709.
You do not need to file if:
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All gifts stay within the annual exclusion and qualify as present-interest transfers.
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Gifts to a US citizen spouse or a qualified charity are fully excluded from filing as long as you transfer complete ownership and control.
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All gifts go to qualified charities where you transfer full ownership.
Did you know? Form 709 is due by April 15 of the year after the gift. A separate form must be filed for each year, and filing doesn’t necessarily mean tax is owed. The 2025 lifetime exemption of $13.99 million typically covers most reportable gifts.
In practice, if you keep cryptocurrency gifts under the annual limit and document the fair market value on the date of transfer, you will likely avoid filing altogether.
Basis and the “dual-basis” trap for recipients
Receiving Bitcoin as a gift is not immediately taxable, but your future capital gains tax depends on the basis and holding period you inherit from the donor.
Carryover basis
You generally inherit the donor’s original cost basis and their holding period. If they bought Bitcoin for $5,000 and gifted it when it was worth $20,000, your basis would be $5,000. When you later sell, you will owe capital gains tax on the difference between your sale price and that basis.
Dual-basis rule
If the gift’s market value is lower than the donor’s basis at the time of transfer, two different bases apply:
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For gains, use the donor’s original basis.
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For losses, use the fair market value (FMV) at the time of the gift.
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If you sell between those two values, no gain or loss is recognized.
Early Bitcoin adopters often have very low cost bases, so recipients of appreciated coins can face significant future tax liabilities. Conversely, gifts of Bitcoin worth less than the donor’s basis limit potential loss deductions. If the donor pays gift tax, part of that payment may increase the recipient’s basis.
Obtain the donor’s purchase date, cost basis, the fair market value on the gift date and whether any gift tax was paid before selling. These details determine whether your next Bitcoin sale results in a taxable gain, a deductible loss or no gain or loss.
Crypto-specific pitfalls to avoid
Most cryptocurrency gifts follow standard property rules, but digital assets introduce additional risks that can trigger audits or disqualify deductions.
1. Turning a gift into a sale
If you sell or swap cryptocurrency before transferring it, the transaction counts as a taxable disposition, not a gift. To qualify as a true gift, you must transfer the asset directly, receive nothing in return and permanently give up control.
2. Poor valuation or missing records
Always document the fair market value (FMV) on the date of transfer, along with your original cost basis, purchase date and transaction IDs. Without proper records, the IRS may challenge the reported value or the recipient’s later gain or loss calculation.
3. Gifts that are really income
If cryptocurrency is given in exchange for services to an employee, contractor or influencer, it counts as compensation, not a gift. This makes it taxable income for the recipient and may subject the sender to payroll or self-employment taxes.
4. Cross-border and non-citizen issues
International gifts or transfers involving foreign wallets may require filing Form 3520 and other disclosures. Gifts to non-US-citizen spouses are capped at about $190,000 in 2025 unlike the unlimited exclusion for US-citizen spouses.
Miss one of these rules, and a generous gesture could quickly become a taxable event.
Simple steps to prevent tax trouble
Gifting or donating cryptocurrency in 2025 can be simple if you follow a few key steps:
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Stay within limits: Keep each recipient’s total gifts at or below $19,000 ($38,000 if splitting with a spouse). If you exceed that amount, file Form 709. You will likely still owe no tax unless you surpass the lifetime exemption.
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Know what you’re passing on: The recipient inherits your cost basis and holding period. Their future tax bill depends on your original purchase price, not the value on the date of the gift.
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Record everything: Keep records of the transfer date, fair market value, your original cost basis and acquisition date, and the wallet or transaction ID. Proper documentation protects both parties if the IRS requests verification.
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Gift, don’t sell: Selling or swapping cryptocurrency before gifting makes the transfer a taxable disposition. Transfer the asset directly instead.
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For charity: Donations exceeding $5,000 require a qualified appraisal, not just an exchange screenshot. Confirm that the charity can accept cryptocurrency before sending.
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Watch cross-border gifts: Foreign recipients and non-citizen spouses face lower exclusions and additional reporting requirements.
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Seek professional advice for large or complex transfers: High-value gifts, multi-signature wallets and trusts can create unique compliance challenges.
Before you gift Bitcoin
Most Bitcoin gifts fall safely within IRS limits, and no immediate tax is due. The risk usually arises later when the recipient sells. Because the donor’s basis carries over, gains or losses depend on that original value, not the market price at the time of gifting.
Handled properly, gifting Bitcoin is a straightforward way to share cryptocurrency wealth without tax complications. Keep detailed records, respect the thresholds and confirm that the transfer qualifies as a true gift. Generosity should not come with a surprise tax bill, and with the right steps, it will not.
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