January 23, 2021

UK tax cryptocurrency guide introduced

UK tax cryptocurrency guide introduced

UK Department of Taxes and Customs (HMRC) has issued guidance oncryptocurrency logs and related business activities.

The guide aims to regulate taxes withcryptocurrency traded tokens - such as bitcoin, which differ from useful and investment tokens. (The HMRC says that a guide to useful and investment tokens will be released later).

Token Trading

From an HMRC point of view, cryptocurrency assets are still considered goods, not money or currency.

Stock Trading Companiestokens, including the sale of goods or services for mining, must pay taxes. The following types of taxes should be distinguished: capital gains tax, corporate tax, income tax, national insurance contribution, stamp tax and VAT.

Most activities related tomining, represent a taxable event in the form of trade, or, the rules determine the object of taxation associated with this activity. If the mined coins are not sold, then they are considered “other income”, taxable.

At the same time, the HMRC says that:

“Mining at home does not amount to a taxable event, while mining tokens in order to generate net profit should be considered a trading activity.”

Cryptocurrency Savings and Wages

The HMRC rules also say that company savings in the form of tokens are treated as an object of taxation, to which both capital gains tax and corporate tax apply.

In 2018, the HMRC has already issued a guide totaxes for individuals. As is the case with individuals, the rules for companies suggest keeping separate records of the various digital assets available, as well as taking into account their balances. For example, if you have bitcoins, lightcoins and ether, then the tax calculation should be carried out on three assets and taking into account these balances for a given period.

Interestingly, HMRC rules now recognizesalaries in virtual currencies, although in general they are not recognized as money by the British authorities. At the same time, employers can not use cryptocurrencies for contributions to pension funds, since the HMRC considers them as goods.

The HMRC also says it can change its rules and interpretation of things in “as the sector evolves”.

</p>