It seems the United Kingdom tax authority has updated its policies concerning crypto assets. The authority has reiterated that Bitcoin is not money, and on Friday, Her Majesty’s Revenue and Customs department (HRMC) updated its tax policy related to cryptocurrency.
Here’s what you need to know to stay compliant with the British taxman.
HRMC’s statement on crypto assets: tax for businesses only provided details for what it calls “exchange tokens” such as Bitcoin. It will, however, provide more information on security and utility tokens at a later date. 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
- Payment for goods and/or services
Companies will be subject to the usual corporation tax including capital gains and VAT, among others. HMRC will consider each case on the basis of its own facts and circumstances, and will apply the relevant legislation and case law to determine the correct tax treatment as needed. All transactions will need to be converted back into Pound Sterling when filing tax returns. The HRMC said that companies and individuals will also have to keep track of how they’ve converted each transaction. With reasonable care, appropriate valuation for the transaction using a consistent methodology is possible, but each individual and company must keep records of their valuation methodology.
Corporate token holdings are considered taxable events, incurring both capital gains tax and corporation tax. As with crypto asset guidance for individuals, similar exchange tokens can be pooled for ease of calculation. For example, Bitcoin, Ether and Litecoin holders may pools the value for “allowable costs” associated with them. This allowable cost may change as more tokens are acquired, exchanged, or sold. Guidance for hard forks, mining and airdrops is also provided with no apparent changes from the individual guidance issued in 2018.
The tax authority made clear their stance that it does not consider Bitcoin or other crypto assets to be money.
Around the world, tax authorities are scrambling to explain how they will handle an increasingly complicated asset class. In the United States, the IRS has failed to explain your crypto liabilities after a hard fork. Elsewhere in Australia and Canada, authorities are systematically tracking down Bitcoin tax evaders. Ironically, Bitcoin may not be considered money but government authorities certainly are working hard to reap its value.
– This article was originally posted at CryptoTraderNews
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