UK tax position on Bitcoins gained through mining?

[m1bxd]

Hi All,

What is the UK tax position on Bitcoins gained through mining?
Are they a dividend? And where is the tax valuation, at appointment (issue) or sale?
And if I bought rights to acquire these Bitcoins, is the initial payment as if I had bought shares, in that I could sell this right to another person?

Cheers MX

[Gator-hex]

Well buying coins is capital gains and selling your mining shares would be capital gains.

If you spent £10,000 on Bitcoins/Mining Shares, and later sold them for £40,000, you report that as a capital gain of £30,000.

I guess shares in mining equipment production would be dividends, they are producing income.

You can also use your spouses capital gains allowance if you say it was a joint buy (£10,600 each).

[m1bxd]

Gator-hex,

Buggery - cloudhashing need to do a CSV output and provide average GBP valuation for daily payouts ASAP!

Many thanks,

Mark

PS Manchester Tax office calling back to clarify in the next three days

[Arksun]

PS Manchester Tax office calling back to clarify in the next three days

I would very much like to know what they have to say and what exactly they classify Bitcoin as currently.

It's something I've been curious as to as well, like lets say I generate Bitcoins for free (well almost free, time invested), then sell them to a private individual directly, does that come under capital gains, or just standard income or what?.  And if Bitcoins do get officially designated as money or currency here in the UK, does simply owning Bitcoins become taxable? or is it still only at the point of selling them for pounds that it does?.

[Gator-hex]

PS Manchester Tax office calling back to clarify in the next three days

I would very much like to know what they have to say and what exactly they classify Bitcoin as currently.

It's something I've been curious as to as well, like lets say I generate Bitcoins for free (well almost free, time invested), then sell them to a private individual directly, does that come under capital gains, or just standard income or what?.  And if Bitcoins do get officially designated as money or currency here in the UK, does simply owning Bitcoins become taxable? or is it still only at the point of selling them for pounds that it does?.

I'm not sure about the UK, but in the US they have set a legal president...

S.E.C. has proved Bitcoin is commodity money (like gold) in the Texas court case S.E.C verses Trendon Shavers (Pirateat40)
http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539730583#.Un-nYiejN3U

[gwlloyd]

It's capital gains as far as I know, I read a FOI request somewhere. You can hold as many coins as you like without declaring, it's when you cash out you have to declare the profit only. In my head that means if you bought £100 of coins, held then cashed out to your bank at £1,500 then you are liable for £1,400 of additional income / gains that tax year and would be taxed on that at your standard rate. I am self-employed so my tax form this coming year will be interesting as I have personal coins but also my business mines coins. HMRC have said publicly that they do not yet consider Bitcoin as a currency and the wording was something along the lines of it's not big enough to warrant any rule changes but they are actively watching it.

Here is a recent, rather pessimistic, blog post about UK banks and Bitcoin, it's kind of relevant. https://www.scirra.com/blog/tom/4/bitcoins-uk-future-looks-bleak

[mrhelpful]

I`m sure there is some sort of tax report on bitcoin, but do you fill out a 1099 misc? This is a good thought to have though.

[Arksun]

It's capital gains as far as I know, I read a FOI request somewhere. You can hold as many coins as you like without declaring, it's when you cash out you have to declare the profit only. In my head that means if you bought £100 of coins, held then cashed out to your bank at £1,500 then you are liable for £1,400 of additional income / gains that tax year and would be taxed on that at your standard rate. I am self-employed so my tax form this coming year will be interesting as I have personal coins but also my business mines coins. HMRC have said publicly that they do not yet consider Bitcoin as a currency and the wording was something along the lines of it's not big enough to warrant any rule changes but they are actively watching it.

Here is a recent, rather pessimistic, blog post about UK banks and Bitcoin, it's kind of relevant. https://www.scirra.com/blog/tom/4/bitcoins-uk-future-looks-bleak

Thanks for the info.

[Lauda]

Tax on mining? No.
Tax on selling? Most likely. Unless you deal in cash then you're good to go.

[m1bxd]

Hi All,

I got a very prompt call back after a conversation with HMRC in Manchester UK, I don't know which office the inspector worked from but, but here is the summary in my situation:

As the Cloudhashing contracting I have is permanent one, it's like I bought the equipment and they charge me a tax deductible management fee.
Valuations to GBP on the day etc.

The Bitcoin payouts are income as dividends, and are thus taxable at 10% for a lower rate UK tax payer.
Valuations to GBP on the day etc.

I guess if you buy a Cloudhashing contract now, you could interpret that as a fixed leasing contract, for which you could count as a depreciating asset and again the management fees Cloudhashing charge would be tax deductible.

Bitcoins bought and sold during normal trading are subject UK capital gains. For which each person has a capital gains threshold before paying 40%, but of course if you are "couple", then you are allowed the joint allowance. 2012/13 Allowance as a single person is £10,600 GBP. So if you are a big player in the trading market, then Bitcoin trading is joint evening activity after you helped washed the dishes... Thus giving you £21,200 profit per year before you start paying 40% tax. But don't forget that do include all other capital gains you made have made, such as profit or asset sales. The allowance is NOT per asset item/class.

However you keep accumulating Bitcoins and end up with 20+ I can see that some tax planning will have to given some consideration.

HMRC Guide to allowance in current tax year and the 2013/14 ahead:
http://www.hmrc.gov.uk/rates/cgt.htm

Keeping your tax on Bitcoins as low as possible:
http://www.which.co.uk/money/tax/guides/capital-gains-tax-explained/capital-gains-tax-tips/

So if you are doing anything more than playing about like you being the odd ebay seller of home good you don't want.

We'll all have to keep good records!

Cheers Mark