Bitcoin taxation in the UK?

[Alessandra]

In the United States, bitcoin is treated as an item of property and is subject to property tax. Whereas in the United Kingdom, bitcoin is treated as private money and is subject to value added tax, corporate tax, income tax and capital gains tax. Since bitcoin is property in the US, when lost or stolen, there are deductions available. Does it mean that when taxed under UK laws, bitcoin cannot be subject to any deductions or exemptions because it is not property but money? What about when bitcoin is given as a gift - what is the proper way of taxation?

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[pawel7777]

Zero replies? Not sure whether OP is still around but let me try:

...Whereas in the United Kingdom, bitcoin is treated as private money and is subject to value added tax, corporate tax, income tax and capital gains tax.

Every commercial activity is subject to tax, whether you provide goods/services in exchange for GBP, BTC or other goods.
Taxation of bitcoin varies, and depends on your circumstances. If you're a business and sell for btc - you're subject to corporation tax. If you're an individual and ie. your employer pays you in bitcoins (entirely or partially) - you're subject to income tax. If you held some bitcoins and decided to sell them, you might be subject to Capital Gains Tax (on the amount above CG allowance, currently £11,100).

You don't pay VAT on bitcoin per se. If you sell bitcoins as a business activity, or if you're a miner, you're not expected to add VAT on such transactions, as far as I know.
But if you're running a business and you're VAT registered (there are exemptions for small companies) then yes, you still need to include VAT in the price whether you sell for GBP or BTC. Same applies if you decided to accept any other good as a payment.

Since bitcoin is property in the US, when lost or stolen, there are deductions available. Does it mean that when taxed under UK laws, bitcoin cannot be subject to any deductions or exemptions because it is not property but money? What about when bitcoin is given as a gift - what is the proper way of taxation?

I'm not aware of and that's the first time I hear about (individual) tax deductions for goods lost or stolen. I'm sure it's not a case, but if it was, money/btc/any other good would likely be treated in the same way.

Gifts are not taxable afaik, again it doesn't matter whether it's money or physical good. Person gifting other person has already paid income tax on that amount, so their free do with it as they please. It wouldn't be fair to double tax it (although there was some sort of capital transfer tax in the UK, abolished decades ago). Things are bit more complex if it comes to inheritance tax though.

Disclaimer: The above was written to the best of my knowledge, but I may be wrong. For professional advice, best enquire directly with HMRC and/or with qualified tax advisor.

 

[toptek]

That's about to change in the US we may see new laws in 2017 and in way there is other taxes on BTC or altcoins  then just property tax  if you mine or sell it or give it as a form of payment in the US . that's a tax.

[pugman]

It should been seen as gambling! I lost £14k due to investing in Ultracoin! But made a lot investing in another crypro! It's gambling! I shouldn't have to pay tax on huge gambles

[alexrose2699]

HMM i guess if you're running a business and you're VAT registered you still need to include VAT in the price whether you sell for GBP or BTC.

[MainIbem]

How does the Government know you have bitcoin when it is actually private? Or has the authorities found a way to unmask the owner of a bitcoin wallet?

[pawel7777]

HMM i guess if you're running a business and you're VAT registered you still need to include VAT in the price whether you sell for GBP or BTC.

Correct. Unless the nature of your business is to sell bitcoins (rather than just accepting btc as a payment), then you don't charge VAT.

How does the Government know you have bitcoin when it is actually private? Or has the authorities found a way to unmask the owner of a bitcoin wallet?

Short answer - they don't know. You can hold $millions in btc in your wallet and authorities won't know about it. But as soon as you try convert to fiat (or purchase high value assets) - that's when you attract their attention.

[alfator]

In what other countries is taxation on bitcoin?

[ozaz]

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-cryptocurrencies

Some 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?

[JohnC2389]

In the United States, bitcoin is treated as an item of property and is subject to property tax. Whereas in the United Kingdom, bitcoin is treated as private money and is subject to value added tax, corporate tax, income tax and capital gains tax. Since bitcoin is property in the US, when lost or stolen, there are deductions available. Does it mean that when taxed under UK laws, bitcoin cannot be subject to any deductions or exemptions because it is not property but money? What about when bitcoin is given as a gift - what is the proper way of taxation?

It's not subject to VAT, Corporat~e~ion Tax isn't relevant (unless you own a business which makes a profit using Bitcoin, and then yes it is of course taxable). Income tax is suffered no matter which currency you are paid in. Gains from any currency investment are subject to Capital Gains taxes. 
Bitcoin is classed as 'foreign currency' in the uk. if you use it in business you pay tax on any gains but you can also claim back any depreciation in the tax year.

[Yuhee]

In the United States, bitcoin is treated as an item of property and is subject to property tax. Whereas in the United Kingdom, bitcoin is treated as private money and is subject to value added tax, corporate tax, income tax and capital gains tax. Since bitcoin is property in the US, when lost or stolen, there are deductions available. Does it mean that when taxed under UK laws, bitcoin cannot be subject to any deductions or exemptions because it is not property but money? What about when bitcoin is given as a gift - what is the proper way of taxation?

It's not subject to VAT, Corporat~e~ion Tax isn't relevant (unless you own a business which makes a profit using Bitcoin, and then yes it is of course taxable). Income tax is suffered no matter which currency you are paid in. Gains from any currency investment are subject to Capital Gains taxes. 
Bitcoin is classed as 'foreign currency' in the uk. if you use it in business you pay tax on any gains but you can also claim back any depreciation in the tax year.

Well in my country bitcoin is not yet fully regulized. But since i am about to move to UK also. I find this topic very insightful. In my country Philippines, there is an exchange site (coins.ph) that we use and we put bitcoin there and it can automatically convert it to Peso (PHP), then you can withdraw it in different styles, like transfer it in a bank account. There is no tax there or any payments on your withdrawal and its free.

My question for anyone in UK, is there the same site that does this same services? Might not be free but as long as it could convert btc to GBP?

[pawel7777]

...

Well in my country bitcoin is not yet fully regulized. But since i am about to move to UK also. I find this topic very insightful. In my country Philippines, there is an exchange site (coins.ph) that we use and we put bitcoin there and it can automatically convert it to Peso (PHP), then you can withdraw it in different styles, like transfer it in a bank account. There is no tax there or any payments on your withdrawal and its free.

My question for anyone in UK, is there the same site that does this same services? Might not be free but as long as it could convert btc to GBP?

There aren't many services offering BTC/GBP pairing, you could always use a regular exchange, even if you sell BTC for USD and withdraw by bank transfer, the funds would get converted to GBP by your UK bank.

There was a great app that did what you describe (auto-conversion) - Circle, but they don't support BTC anymore.

You can also check Coinbase, they have a mobile app and are open to UK (I believe they have BTC/GBP pair), but haven't tested them yet so not sure is it any good.

[Yuhee]

...

Well in my country bitcoin is not yet fully regulized. But since i am about to move to UK also. I find this topic very insightful. In my country Philippines, there is an exchange site (coins.ph) that we use and we put bitcoin there and it can automatically convert it to Peso (PHP), then you can withdraw it in different styles, like transfer it in a bank account. There is no tax there or any payments on your withdrawal and its free.

My question for anyone in UK, is there the same site that does this same services? Might not be free but as long as it could convert btc to GBP?

There aren't many services offering BTC/GBP pairing, you could always use a regular exchange, even if you sell BTC for USD and withdraw by bank transfer, the funds would get converted to GBP by your UK bank.

There was a great app that did what you describe (auto-conversion) - Circle, but they don't support BTC anymore.

You can also check Coinbase, they have a mobile app and are open to UK (I believe they have BTC/GBP pair), but haven't tested them yet so not sure is it any good.

Oh ok.. thanks for the info. Good thing i have encountered this post becausei tried posting about this but unfortuntely no one replied me. The only services i know that could support bank to bank is ripple? because i actually havent tried it. Can it transfer money country to another country?. Specfifically PHP to GBP if possible? Havent actually tried its services? can anyone clarfiy me about ripple?

[viditagarwal]

The bitcoin is a new system of payment and the world's first decentralised digital currency.Although bitcoin transactions have been declared as illegal; in some countries and other countries have disallowed their banks from handling the currency, bitcoin is available to use in the UK.Consequently, there are tax impacts, too.The HMRC guidelines on the tax treatment of transactions relating to the sale or use of bitcoins and other similar cryptocurrencies are applicable for bitcoin.https://www.dnsassociates.co.uk/blog/bitcoins-tax-implications-uk

[lili song]

Yes, because in UK the government already legalized and use bitcoin for transactions.
So the government give tax in bitcoin. I sure if some country legalized bitcoin, the government will put tax in bitcoin transactions.

[satchmoh]

Yes, because in UK the government already legalized and use bitcoin for transactions.
So the government give tax in bitcoin. I sure if some country legalized bitcoin, the government will put tax in bitcoin transactions.

That is quite interessing. But I do not think, that they will put a general tax on bitcoin transactions. In Germany we do not have a tax on bitcoin transactions. But some advocats advice their clients to sell btc after holding them at least a year

[gentlemand]

Yes, because in UK the government already legalized and use bitcoin for transactions.
So the government give tax in bitcoin. I sure if some country legalized bitcoin, the government will put tax in bitcoin transactions.

As far as I know the government hasn't really stated anything about Bitcoin. They left it to the HMRC to classify it as foreign currency. It looks like the government doesn't really give a shit.

It's up to you to declare your capital gains on it. Sales via BTC will be taxed with VAT anyway as they're almost all converting it to GBP.

If they did introduce some actual regulation then maybe banks would start to offer accounts to crypto businesses.