UK tax - Capital gains + overseas spending.

[AlexM]

Hi I need some tax help.

Q1 -
I invested £10,000 in Bitcoins. Last tax year I sold £10,000 of Bitcoins or about 25% of my Bitcoin holding. So in my tax return do I put it at 100% return of my initial deposit, thus no tax to pay. Or do I put it at £2,500 of investment returned plus a capital gain of £7,500. This is under £10,600 so no tax to pay. If the second option what implications does this have on national insurance. I am self employed. Would this extra £7,500 be liable for NI payments?

Q2 -
I am going on my honeymoon abroad next year. Can I pay for hotels or apartment rentals with Bitcoins, tax free? My thinking is this is not money that is ever going to come to the UK. I transferred money to mtGox in Japan, to purchase Bitcoins. I could transfer Bitcoins straight from mTgox in Japan to the hotelier or holiday letting agent. The capital gain was earned abroad and I will be spending it abroad, surely this means that the UK has no right to any income.

Q3 -
Within the next 1-5 years I may like to divest at least half of my Bitcoin investments. What is the best way of doing this whilst keeping my tax bill low? I have listed my ideas below but, i'm not sure they are correct, and i'm sure other people might have better ideas.
a) I could become a resident of Germany from April to April for 1 year and pay no capital gains tax. As the money would be earned in the EU I could transfer it straight to my UK bank if I decided to move back to the UK with no extra tax paid.
b) I could move to a tax haven with no 0% tax rate for a UK financial year. However I presume that if the money is earned in a non EU tax haven then I may be subject to paying tax on the money I bring into the country.
c) I stay in the UK I pay 10% capital gains as I re-invest all my capital gains that tax year in other businesses. e.g. I purchase a house, renovate it and sell it hopefully for a profit. But if I break even I would still have my Bitcoin money back whilst only paying 10% tax.

Q4 -
I have read other people stating that VAT is payable on Bitcoins capital gains and that because Bitcoins value is under £6000 no tax would be payable. Whilst I would like the later to be true, neither of these ideas seem to make any sense to me. But if VAT really is payable it almost certainly rules out selling any more Bitcoins in the UK.

Any help and thoughts are welcome. Q3 & Q4 currently refer to a pipe dream of mine that will only be realised if the Bitcoin prices increase 5-20 fold, and stays high for long enough for me to do something about it.

[1715005115]

1715005115

[1715005115]

1715005115

[RaTTuS]

IANAA
http://www.hmrc.gov.uk/cgt/intro/basics.htm
The Annual Exempt Amount for the tax year 2012-13 is:
£10,600 for each individual

you did not make a gain on the Q1

you will not be able to transfer from MTGox to other accounts - that is covered by AML stuff - MTGox is not a bank
you have to transfer it to your account
you may be able to setup several accounts [japan other] and transfer there

also if you want it in 8 weeks you better start the transfer from gox now...

[AlexM]

IANAA
http://www.hmrc.gov.uk/cgt/intro/basics.htm
The Annual Exempt Amount for the tax year 2012-13 is:
£10,600 for each individual

you did not make a gain on the Q1

you will not be able to transfer from MTGox to other accounts - that is covered by AML stuff - MTGox is not a bank
you have to transfer it to your account
you may be able to setup several accounts [japan other] and transfer there

also if you want it in 8 weeks you better start the transfer from gox now...

Thanks for the speedy reply. I'm not quite sure I understand your replies totally.
From Q1, I assume that you mean I have no National Insurance contributions as there are no tax implications.
From Q2, I assume that you mean that I would be liable for tax on Bitcoins spent unless I cashed out the Bitcoins into either cash or a bank account of the country I was visiting, rather than spent them.

I only have a handful of coins in Mtgox, and on another exchange these coins have never been to the UK. These would be enough to pay for my honeymoon overseas spending. Thus I could get my tax free allowance this year plus spend the coins abroad as long as I P2P traded them when I was abroad.