News added on 21.12.2018

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Cryptoassets

HMRC revises guidance on the taxation of cryptoassets

HMRC has updated the guidance on the tax treatment of cryptoassets such as bitcoin. Which taxes could be charged on the profits?

What are cryptoassets? Cryptoassets are cryptographically secured digital representations of value or contractual rights that can be transferred, stored and traded electronically. There are currently three recognised types of token: exchange, security and utility. The updated guidance focuses on exchange tokens, which includes bitcoin.

How will profits on cryptoassets be taxed? HMRC will apply the relevant tax provisions based on the facts of each case rather than by reference to terminology. The majority of individuals hold cryptoassets as an investment and so any gain on the disposal of such assets will be subject to capital gains tax (CGT). However, where individuals receive cryptoassets from their employer, mining, airdrops or transaction confirmation, they will be liable to income tax and NI. HMRC has confirmed that where individuals are running a business that is trading in cryptoassets, income tax and NI will take priority over CGT. Guidance for businesses and companies is likely to be published in 2019.

Are there any other tax implications? The guidance also confirms the following:

  • Cryptoassets will be pooled (in the same manner as shares) for CGT purposes.
  • Cryptoassets are not considered to be currency or money so they cannot be used to make a tax-relievable contribution to a registered pension scheme.
  • Cryptoassets will be property for the purposes of inheritance tax.

Unfortunately, HMRC has not provided any insight on how to determine the situs of cryptoassets for CGT purposes; this is likely to increase uncertainty for non-UK domiciled/temporary non-UK resident individuals.

HMRC has confirmed that due to the fast developing nature of this new sector, it will continue to develop its guidance where necessary.

The guidance can be found here.

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