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Author Topic: So are all these people paying CGT on cars they're buying with BTC?  (Read 1509 times)
protokol
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December 11, 2013, 12:08:56 PM
 #1

I was just thinking, if I bought a £100,000 car I might be able to buy it anonymously but I'd still have to register it.

So I'd probably have to declare Capital Gains Tax on the purchase. If I paid a certain price per bitcoin originally, then I could work out the CGT. But what if I mined the coins, how would I work out how much they cost me (Hardware price+power?).

And what if I bought and mined bitcoins and altcoins at different times and different prices, doing multiple exchanges between them over a period of years? How could I possibly work out accurately what it cost me? Would I need records from every exchange showing every single trade??

Hypothetically if someone were to just ignore the CGT on a purchase of a car/house, how lenient would the Taxman be if they were caught, seeing as he doesn't even really know how to treat crypto either? (I phoned him and he was clueless).

Also couldn't someone say they were just securing the network, and never anticipated the rise in value? I guess that wouldn't hold up in court after you went out and bought a Rolls Royce even though you have no job  Cheesy

Guess I'll make that my sig, all the cool kids have one...
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December 11, 2013, 12:43:43 PM
 #2

In the UK you don't have to pay CGT on cars: http://www.hmrc.gov.uk/cgt/intro/when-to-pay.htm

If you start buying expensive cars/stuff and don't have the correlating source of taxable income, they could get you for money laundering or tax evasion or some other bullshit.

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protokol
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December 11, 2013, 01:16:14 PM
 #3

In the UK you don't have to pay CGT on cars: http://www.hmrc.gov.uk/cgt/intro/when-to-pay.htm

If you start buying expensive cars/stuff and don't have the correlating source of taxable income, they could get you for money laundering or tax evasion or some other bullshit.

Yeah I'm in the UK. Well I think I would have to pay CGT if I BOUGHT a car with bitcoin (if I SOLD my antique car worth £1m then I definitely wouldn't pay CGT).

Guess I'll make that my sig, all the cool kids have one...
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December 11, 2013, 06:23:58 PM
 #4

Yeah I think you legally should be paying CGT...

If you are mining, and making a profit, then you are self employed and should be keeping records, right? Wink Not sure how you calc ££ profits in this case though, maybe as you earn, or maybe at the end of the year see what your bitcoins are worth and convert the appropriate amount to ££ for tax.

You probably could get away with it, but don't expect a tax man to be lenient... personally I would not take such a risk.

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December 12, 2013, 04:56:13 PM
 #5

I was just thinking, if I bought a £100,000 car I might be able to buy it anonymously but I'd still have to register it.

So I'd probably have to declare Capital Gains Tax on the purchase. If I paid a certain price per bitcoin originally, then I could work out the CGT. But what if I mined the coins, how would I work out how much they cost me (Hardware price+power?).

And what if I bought and mined bitcoins and altcoins at different times and different prices, doing multiple exchanges between them over a period of years? How could I possibly work out accurately what it cost me? Would I need records from every exchange showing every single trade??

Hypothetically if someone were to just ignore the CGT on a purchase of a car/house, how lenient would the Taxman be if they were caught, seeing as he doesn't even really know how to treat crypto either? (I phoned him and he was clueless).

Also couldn't someone say they were just securing the network, and never anticipated the rise in value? I guess that wouldn't hold up in court after you went out and bought a Rolls Royce even though you have no job  Cheesy

This is a good question that all users of cryptos should consider.  It will only help to better understand how bitcion will evolve over time.  I don't know the answer to the question but I'm also intrigued by the topic.

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December 12, 2013, 07:11:04 PM
 #6

Yeah I think you legally should be paying CGT...

If you are mining, and making a profit, then you are self employed and should be keeping records, right? Wink Not sure how you calc ££ profits in this case though, maybe as you earn, or maybe at the end of the year see what your bitcoins are worth and convert the appropriate amount to ££ for tax.

You probably could get away with it, but don't expect a tax man to be lenient... personally I would not take such a risk.

Yeah you're right, I got a bit more sense the second time I phoned HMRC, they basically said yeah, CGT is payable on any profit over £10,900/year.

But they didn't have much clue about how I should calculate my profit, especially when I mentioned mining and trading altcoins (no surprise really..)

It seems a bit unfair if you're a really savvy daytrader, that's accumulated say 100BTC from well-timed trading (not me btw  Cheesy)to get taxed for all of it. I mean gambling wins are CGT-free, why should BTC trading be any different? When people started playing around with it, it was highly experimental.

Hmmm guess we'll just have to wait for the first BTC-Tax-evasion case to find out where we stand  Grin

Guess I'll make that my sig, all the cool kids have one...
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December 12, 2013, 07:32:06 PM
 #7

Yeah I think you legally should be paying CGT...

If you are mining, and making a profit, then you are self employed and should be keeping records, right? Wink Not sure how you calc ££ profits in this case though, maybe as you earn, or maybe at the end of the year see what your bitcoins are worth and convert the appropriate amount to ££ for tax.

You probably could get away with it, but don't expect a tax man to be lenient... personally I would not take such a risk.

Yeah you're right, I got a bit more sense the second time I phoned HMRC, they basically said yeah, CGT is payable on any profit over £10,900/year.

But they didn't have much clue about how I should calculate my profit, especially when I mentioned mining and trading altcoins (no surprise really..)

It seems a bit unfair if you're a really savvy daytrader, that's accumulated say 100BTC from well-timed trading (not me btw  Cheesy)to get taxed for all of it. I mean gambling wins are CGT-free, why should BTC trading be any different? When people started playing around with it, it was highly experimental.

Hmmm guess we'll just have to wait for the first BTC-Tax-evasion case to find out where we stand  Grin
I'll certainly be paying capital gains on any significant cash outs I do.  I don't want to run into trouble with the tax man.

If you're a miner, and you invest in equipment, you could call that your cost basis.  Then when you sell some of your Bitcoins, you can deduct a percentage of that basis based on the percentage of Bitcoin you sell.
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December 12, 2013, 09:48:10 PM
 #8

Yeah I think you legally should be paying CGT...

If you are mining, and making a profit, then you are self employed and should be keeping records, right? Wink Not sure how you calc ££ profits in this case though, maybe as you earn, or maybe at the end of the year see what your bitcoins are worth and convert the appropriate amount to ££ for tax.

You probably could get away with it, but don't expect a tax man to be lenient... personally I would not take such a risk.

Yeah you're right, I got a bit more sense the second time I phoned HMRC, they basically said yeah, CGT is payable on any profit over £10,900/year.

But they didn't have much clue about how I should calculate my profit, especially when I mentioned mining and trading altcoins (no surprise really..)

It seems a bit unfair if you're a really savvy daytrader, that's accumulated say 100BTC from well-timed trading (not me btw  Cheesy)to get taxed for all of it. I mean gambling wins are CGT-free, why should BTC trading be any different? When people started playing around with it, it was highly experimental.

Hmmm guess we'll just have to wait for the first BTC-Tax-evasion case to find out where we stand  Grin

I don't understand where the problems lies with this:
You pay tax for your gains on forex? Same with trading btc/ltc. Nothing different from euro/usd.
You mine coins , you have cost , just like growing peaches or strawberries .
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December 13, 2013, 12:06:09 AM
 #9

IANAA but in the UK it will be fairly simple case of how many GBP appeared in your bank account.

If you bought hardware, that can be deducted, and you can probably (about 99% sure) deduct electricity costs.

If you don't sell them, no realised gain. So just stay under £10.9K a year. Or pay tax on anything above it if you *really* want to cash out more...

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December 13, 2013, 12:08:34 AM
 #10

...snip...

 I mean gambling wins are CGT-free, why should BTC trading be any different?

...snip...
According to the tax man trading isn't gambling Wink

(Although spread betting is... and yet CFD's aren't  Roll Eyes )

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December 13, 2013, 11:46:32 PM
 #11

For cars or houses, there are many solutions.
For a car, the easiest for you may be to rent it.

X
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December 14, 2013, 02:13:57 AM
 #12

Capital gain only counts when you cash out to fiat, currently there is no clear rules when you exchange it with goods

This is challenging for accounting. Imagine that you spent 100 coins at the beginning of the year ($1500) in your business and get a return of 10 coins at the end of the year($9000), then your result is a loss of 90 coins, you should get a tax deduction of 90 coins, which is $81000  Grin

However, if counted in USD, you have a net gain of $7500, so you have to pay income tax...




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December 14, 2013, 04:27:23 AM
 #13

Capital gain only counts when you cash out to fiat, currently there is no clear rules when you exchange it with goods

This is challenging for accounting. Imagine that you spent 100 coins at the beginning of the year ($1500) in your business and get a return of 10 coins at the end of the year($9000), then your result is a loss of 90 coins, you should get a tax deduction of 90 coins, which is $81000  Grin

However, if counted in USD, you have a net gain of $7500, so you have to pay income tax...

Almost everything you said is wrong.
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December 14, 2013, 05:23:26 AM
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Capital gain only counts when you cash out to fiat, currently there is no clear rules when you exchange it with goods

This is challenging for accounting. Imagine that you spent 100 coins at the beginning of the year ($1500) in your business and get a return of 10 coins at the end of the year($9000), then your result is a loss of 90 coins, you should get a tax deduction of 90 coins, which is $81000  Grin

However, if counted in USD, you have a net gain of $7500, so you have to pay income tax...

Almost everything you said is wrong.

Almost?

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December 14, 2013, 06:08:46 AM
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Capital gain only counts when you cash out to fiat, currently there is no clear rules when you exchange it with goods

This is challenging for accounting. Imagine that you spent 100 coins at the beginning of the year ($1500) in your business and get a return of 10 coins at the end of the year($9000), then your result is a loss of 90 coins, you should get a tax deduction of 90 coins, which is $81000  Grin

However, if counted in USD, you have a net gain of $7500, so you have to pay income tax...





Oh really!
Have you ever dealt with Capital gain tax?
Also I loved the part about exchanging fiat to goods.
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December 14, 2013, 03:58:07 PM
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Capital gain only counts when you cash out to fiat, currently there is no clear rules when you exchange it with goods

This is challenging for accounting. Imagine that you spent 100 coins at the beginning of the year ($1500) in your business and get a return of 10 coins at the end of the year($9000), then your result is a loss of 90 coins, you should get a tax deduction of 90 coins, which is $81000  Grin

However, if counted in USD, you have a net gain of $7500, so you have to pay income tax...





Oh really!
Have you ever dealt with Capital gain tax?
Also I loved the part about exchanging fiat to goods.

This guy is right.  Whenever you exchange Bitcoin for something of value, you MUST pay either income tax or CGT.

See: http://www.bitcointax.info/

Do not get your ass audited, it SUCKS.

Quote
Example 2:       Satoshi Nakamoto purchases 1 BTC for $100 on April 1, 2013.  A day later, 1 BTC is valued at $200.  Later that day, when the value of 1 BTC has not increased, Satoshi exchanges his 1 BTC for a detailing job on his car that has a fair market value of $300.

Conclusion:     Satoshi has realized $300 of proceeds and $200 of gains that must be reported on his tax return for 2013.

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December 14, 2013, 04:00:45 PM
 #17

I pay 28% CGT on mine.
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December 14, 2013, 04:54:26 PM
 #18

There are other possibilities:

If you take a loan to spend, but do not spend the coins, you get tax deduction for the interest cost

If you take coins to another country and spend there, you will be very welcome since you are the rich foreign investors for that country

So the most common practice will be: Earn a lots of coins at home, and go to a foreign country and retire Grin

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December 15, 2013, 10:24:51 AM
 #19

There are other possibilities:

If you take a loan to spend, but do not spend the coins, you get tax deduction for the interest cost

If you take coins to another country and spend there, you will be very welcome since you are the rich foreign investors for that country

So the most common practice will be: Earn a lots of coins at home, and go to a foreign country and retire Grin
Unless you are British, in which case you are liable for taxes on your worldwide income/capital gains, so the moment you cash out abroad you need to send a cheque back to the HMRC. Or surrender your passport (you can buy a Malta one instead Wink )
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December 15, 2013, 11:27:53 AM
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There are other possibilities:

If you take a loan to spend, but do not spend the coins, you get tax deduction for the interest cost

If you take coins to another country and spend there, you will be very welcome since you are the rich foreign investors for that country

So the most common practice will be: Earn a lots of coins at home, and go to a foreign country and retire Grin
Unless you are British, in which case you are liable for taxes on your worldwide income/capital gains, so the moment you cash out abroad you need to send a cheque back to the HMRC. Or surrender your passport (you can buy a Malta one instead Wink )

I assume johnyj means you move to another country for the whole tax year (or the rest of your live), in which case IIUC you wouldn't owe UK Capital Gains Tax for that tax year.

If the idea is that you'd just go overseas to shop then come right back while remaining a UK resident the whole time then surrenduring your UK passport probably wouldn't help either.
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