What You Need to Know About the Queens Crypto Tax Update
The UK's tax department has revised its policy for your crypto taxation. | Source: Ink Drop/Shutterstock.com
- The UKs tax authority has updated its tax policy for crypto assets.
- Expect huge administrative headaches as all crypto transactions need to be converted into £ and recorded.
- The authority reiterates that Bitcoin is not money.
Her Majestys Revenue and Customs (HRMC) on Friday updated its tax policy related to cryptocurrency in the UK. Heres what you need to know to stay compliant with the British taxman.
The HRMCs statement on Cryptoassets: tax for businesses only provided details for what it calls exchange tokens such as Bitcoin. It will, however, provide more info on security and utility tokens at a later date.
How Tax Affects Cryptoassets in Your UK Business
Businesses, in particular, will pay tax if they use exchange tokens:
- By buying or selling them
- Exchanging them for other assets including crypto assets
- By mining them
- Or as payment for goods and/or services
Companies will be subject to the usual corporation tax including capital gains and VAT amongst others.
They may be more concerned regarding the lack of crypto tax standards in the UK, however:
HMRC will consider each case on the basis of its own facts and circumstances. It will apply the relevant legislation and case law to determine the correct tax treatment.
Adding to the Administrative Headache
All transactions will need to be converted back into pounds sterling when filing tax returns. Adding to this headache, the HRMC said that companies and individuals will also have to keep track of how they converted each transaction.
Reasonable care needs to be taken to arrive at an appropriate valuation for the transaction using a consistent methodology. Individuals and companies must also keep records of the valuation methodology.
HRMC Says Bitcoin is Not Money
Not surprisingly the tax authority reiterated its stance that it does not consider Bitcoin or other crypto assets to be money.
It is important to note that HMRC does not consider any of the current types of cryptoassets to be money or currency.
Authorities around the world are coming to grips with an increasingly complicated asset class.
In the US, for example, the IRS has already failed to explain your crypto liabilities after a hard fork. Elsewhere in Australia and Canada, the authorities are consistently chasing down Bitcoin tax evaders.
Bitcoin may not be money but authorities certainly are working hard to reap its store-of-value rewards.