UK Tax information on Bitcoin - Community Compilation

[Lethn]

I've decided to be helpful that I think us UK folks should compile a whole list of the different responses given by the HMRC ( That's the British version of the IRS for you Americans ) because trying to figure out the tax code for Bitcoin is giving me a fucking headache and I'm trying to get it all worked out before I make any real money because then I'll be ready for when it happens.


http://www.youtube.com/watch?v=wfV7GcOHSd8 - Nowell Associates Limited Video Blog #1 - Bitcoin Tax - 05-01-2013

https://bitcointalk.org/index.php?topic=419963.0 - HMRC is to be categorised as private money - Posted by mtnminer

http://www.hmrc.gov.uk/rates/cgt.htm - Just been emailed by the HMRC and supposedly Bitcoins fall under capital gains tax - Posted by Lethn

I don't know how I failed to notice this but if anyone remembered there was a post in the newbie section about a UK accountancy accepting Bitcoins and Litecoins and this video gives a small overview of what the UK HMRC treats Bitcoin as, ish, seems like they're in the same situation many UK people are where the government hasn't been very clear about it all.

If you guys want to post stuff up I'll edit this original post while we talk about it and I'll put up a list of all the different sources we can find and give credit to who posted it. I am also going to go through the process of pestering HMRC for proper information regarding Bitcoin taxation and book keeping so I'll let you know if anything comes from it.

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[franky1]

the video and other forum posts are all if's and maybe's .

PLEASE would you all just phone up HMRC. the phone call is not expensive and their customer service reps are not cops or dictators that will chew your head off.

i see soo many people mention if's or maybe's but they have all never actually contacted HMRC.

so here it is.
HMRC will only tax you when you transfer your bitcoins into pound coins. and its taxed just like any other income. so if you withdraw £20k then that is your income. combine it with all your other income and work out the tax.

its that simple.

and to reply to other posts on other threads i will repeat what i said there.

bitcoin is not a commodity.
a commodity is a raw material used to create other materials/products

bitcoin is not a share
a share is a percentage of a company

bitcoin is not a stock
stock is the holdings of a company

bitcoin IS an asset
much like a car, artwork, personal possessions.

when it comes to certain situations such as purchasing something on a retail website, the VAT and merchant tax stuff is treated much like digital tokens.. or as we brits call them, gift vouchers. (prepaid value) which when the merchant accepts it, its treated just like money although merchants have a separate code for prepaid gift vouchers. at the end result it is corporation tax (business income tax)

but for non business use/investors cashing out, its standard personal income tax

if in any doubt, dont argue about it on forums or think that you have a different opinion that has not been verified by HMRC. instead just call them, i promise you, they wont bite your head off.

[Lethn]

lol! I'm going to do that myself if they don't respond to my email first I just think it's a good idea to compile it all so people have somewhere to look and if I can get a proper statement from HMRC about it I'll post it up here.

HMRC will only tax you when you transfer your bitcoins into pound coins. and its taxed just like any other income.

Oh and wait a minute, where's your proof of that? Last I heard Bitcoins were being treated as Digital Tokens and had some kind of different tax placed on them? This is why I made this thread because it isn't actually as simple as you make it out to be, I also need to find out whether I need to do book keeping of my sales etc. in Bitcoin or whether it should be for the sales made in my trading account instead.

[qfdev]

PLEASE would you all just phone up HMRC. the phone call is not expensive and their customer service reps are not cops or dictators that will chew your head off.

The chances of calling HMRC and speaking to anyone who has even the faintest idea what Bitcoin is (least of all, how it should be taxed) would be pretty close to zero.

The grey area is what happens if you do not cash out the Bitcoin but rather use any gain to directly purchase goods and services (I know that's pretty difficult right now in the UK but it won't be for long). If I bought £100 of BTC back in January 2013, by 2014 I would have approx £10,000 worth of buying power in BTC...according to what HMRC have already published I could spend these directly and incur no personal tax liability.

There's a short discussion here on AccountingWeb as somebody posed a similar question:
http://www.accountingweb.co.uk/anyanswers/question/tax-bitcoin-gains-hands-individual

[fluidjax]

I called HMRC and the person who answered the phone was very pleasant, I told her that I wanted to ask her some tax question relating to Bitcoin, she politely put me on hold for a couple of minutes and said  had looked up on the internet what a Bitcoin is and I could go ahead and ask my questions
She also stated that if I wanted to ask 'if' type questions I would need to speak to a tax advisor, only questions relating to my actual circumstance would be answered.
Based on this conversation, I decided that written questions and written answers would be much more beneficial for eveyone, so i have written a number of questions relating to my personal circumstances and will post the response once recieved.

[Lethn]

Problem is that Tax Advisors don't seem to really understand or give proper clarity on Bitcoins either, I'll see who I can get to about that though it's going to be one of those things like Germany where the governments are going to have to take a proper position on it.

[Lethn]

Good news guys! I finally received a response from an email I sent way back at Christmas, it looks like Bitcoins fall under the category 'Capital Gains' according to HMRC so that means there's a maximum tax rate on them of 18% - 28% which is pretty fantastic actually, I'm going to pester them for more details and make sure this information is double checked so we don't make any mistakes, including things like which sub-categories they fall into.

http://www.hmrc.gov.uk/cgt/intro/when-to-pay.htm

http://www.hmrc.gov.uk/rates/cgt.htm

I should also point out that in the email the HMRC hasn't recognised Bitcoin has legal tender, they didn't seem to say much about it being private money though so that might be something that could change later in the year.

[guybrushthreepwood]

I should also point out that in the email the HMRC hasn't recognised Bitcoin has legal tender, they didn't seem to say much about it being private money though so that might be something that could change later in the year.

Think they'll only acknowledge something as legal tender if they issue it.

[raskul]

Just been emailed by the HMRC and supposedly Bitcoins fall under capital gains tax - Posted by Lethn

if bitcoin falls under cgt, reply and tell them to get their arses in gear and sort out a proper regulator. that's what taxes are for.

[franky1]

ill refer to my post above that explained HMRC's announcement this week.

i phoned HMRC months ago and got their unofficial verdict. which is the same as the official announcement.

product purchases = vat
bitcoin exchanging for altcoins or fiat = no vat, no capital gains
when receiving FIAT = as always income tax for personal and corporation tax for business.

i have had many discussions to explain to HMRC about it since last year, so im now glad its official