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How will HMRC’s new cryptocurrency tax update affect you?

In their new taxation guidelines HMRC have stated that as cryptocurrencies (and by ‘cryptocurrencies’ they mean exchange tokens like Bitcoin, advice on security and utility tokens will follow) are neither money nor securities in their eyes, they will be exempted from stamp tax.

On the surface this might look like good news for investors but many think the new guidelines could actually herald a massive administrative headache for everyone involved.

The Revenue has also insisted businesses will now need to keep a record of every transaction having not only exchanged the value of the transaction into sterling but also kept a record of how they calculated that value:

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.”

This is because companies using exchange tokens will be liable for a number of taxes including corporation tax, Capital Gains Tax and VAT if they are buying, selling, exchanging or mining tokens or using them to pay for goods or services.

The picture is muddied further by the convoluted factors that need to be considered when working out what actually constitutes ‘trading’.

The new guidelines state that the decision as to whether the buying and selling exchange tokens will count as a trade will depend on a number of factors including the size of the transaction, the frequency of activity and the intention behind the transaction. Moreover, if the tokens are kept as part of an existing trade, any profits made will also be taxable so will need to be included in that company’s P&L.

The guidelines also include a provision for cryptocurrency mining. If it is felt a particular piece of mining activity can not in itself be counted as a trade, the overall value of any tokens following a successful mining campaign will be taxable.

The only problem is there appears to be a distinct lack of detail in terms of how businesses and investors can expect to be taxed because HMRC also says in their commentary that they plan to:

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.”

The UK’s new guidelines and apparent commitment to derive increasing levels of tax from cryptocurrency are in step with other tax authorities around the world.

The Canadians and Australian governments are reported to be working hard to crack down on those avoiding paying tax on crypto profits. And, despite arguably providing advice that is equally as woolly as that hat’s just come from their UK counterparts, the US’ IRS is also working hard to make sure they are recouping what they believe they’re owed.

While the cryptocurrency world remains unregulated, investors and traders need to know they can access the specialist legal advice they need to protect themselves and their assets. Selachii is now Europe’s leading cryptocurrency law firm so if you have any legal questions regarding bitcoin or any other cryptocurrency please call us today on 020 7792 5649 or email us at This email address is being protected from spambots. You need JavaScript enabled to view it..

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