I've just started looking into taxation on cryptocurrncies and would appreciate it if anyone could help my understanding. Obviously, I'm not looking for or expecting authoratative advice here. But opinions would be helpful.
FYI, All my other investments are wrapped in an ISA so I've never really had to think about tax on investments and so my knowledge here is limited.
I only buy cryptocurrencies to (hopefully) benefit from long-term appreciation. I don't engage in any income generating activities, such as mining.
There are a couple of passages in HMRCs brief on cryptocurrencies that seem relevant to me, but which I don't fully understand.
Whether any profit or gain is chargeable or any loss is allowable will be looked at on a case-by-case basis taking into account the specific facts. Each case will be considered on the basis of its own individual facts and circumstances. The relevant legislation and case law will be applied to determine the correct tax treatment. Therefore, depending on the facts, a transaction may be so highly speculative that it is not taxable or any losses relievable.
Chargeable gains: CT and CGT - if a profit or loss on a currency contract is not within trading profits or otherwise within the loan relationship rules, it would normally be taxable as a chargeable gain or allowable as a loss for CT or CGT purposes. Gains and losses incurred on Bitcoin or other cryptocurrencies are chargeable or allowable for CGT if they accrue to an individual or, for CT on chargeable gains if they accrue to a company.
https://www.gov.uk/government/publications/revenue-and-customs-brief-9-2014-bitcoin-and-other-cryptocurrencies/revenue-and-customs-brief-9-2014-bitcoin-and-other-cryptocurrenciesSome questions related to the above:
* Are ICO investments "so highly speculative" that they are not taxable or any losses relievable?
* I don't know what "within trading profits or otherwise within the loan relationship rules" means. Is this something I need to understand as an individual or is it only relevant for corporation tax (CT)?
A few more general questions
* Is it only when crypto is converted to FIAT that gains become relevant, or do you need to consider gains on a trade involving two different cryptocurrencies (e.g. BTC->ETH)?
* If the latter, which gain is relevant? the gain on ETH relative to BTC, or the gain in ETH relative to GBP?
* Are the gains chargeable only when I dispose of the currency, or are they chargeable at the end of each tax year, even if I still hold the currency?
Show Posts
