British Tax Authority Updates Cryptocurrency Guidelines, Says It Is Not Money

[malevolent]

So far BTC has been treated like foreign currency in UK tax terms. Profits from any foreign currency fluctuations are subject to capital gains taxes just as BTC is.

Only if you sell or are you taxed even if you hold bitcoins which have appreciated in value?

Almost all of the time tax is taken on trust anyway. It would require something pretty radical for them to investigate you.

It seems like a sensible policy regarding mining. Obviously no tax at all would be rather better but at least they're not as stupid or unworldly as other countries who attempted to put VAT on it.

These countries (in the EU and probably within the EEA as a whole) even if they wanted to can thankfully no longer do it since the EU Court of Justice has rules otherwise.

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[squatter]

If the mining activity does not amount to a trade, the value (at the time of receipt) of any cryptoassets awarded for successful mining will generally be taxable as miscellaneous income, with any appropriate expenses reducing the amount chargeable.

If the miner keeps the awarded assets, they may have to pay Capital Gains Tax or Corporation Tax on chargeable gains when they later dispose of them.

So, there is a room for a bit of mining avoiding taxes while keeping a low profile, especially since there will be no VAT on crypto sales.

Is there a "trade" or "self-employment" tax in the UK that hobby miners are able to avoid? They still appear to be liable for taxes on mining receipts as ordinary income, plus capital gains tax if they benefit from appreciation.

This means that any Corporation Tax legislation which relates solely to money or currency does not apply to exchange tokens or other types of cryptoasset. For example:

    the foreign currency rules (section 328 of the Corporation Tax Act 2009)
    the Disregard Regulations relating to exchange gains and losses (Statutory Instrument 2004/3256)
    designated currency elections (section 9A of the Corporation Tax Act 2010)

What exactly are the implications of this for Bitcoin traders?

[stompix]

Is there a "trade" or "self-employment" tax in the UK that hobby miners are able to avoid? They still appear to be liable for taxes on mining receipts as ordinary income, plus capital gains tax if they benefit from appreciation.

Obviously gentlemand is far more qualified to answer this so I'll let him go through the details but I do share his view, as my first impression was that large scale mining is also subject to corporation tax.
If you keep a low profile and don't do anything on a large scale nobody is going to start analyzing your finances and taxes, and obviously a few s17 more or less won't bring you that much profit to tip the scale that much.

In theory, you would have to pay tax for every gain, and that is everywhere but who does?
I did pay some income tax for the amount I withdraw via my bank account, did I say anything about the gains from the CM?
Don't know anything about that man!!!  

These countries (in the EU and probably within the EEA as a whole) even if they wanted to can thankfully no longer do it since the EU Court of Justice has rules otherwise.

Speaking of the EU, imagine having to pay income tax on foreign currency gains with 18 currencies instead of the euro...

[CryptoBry]

The United Kingdom’s tax, payments and customs authority, Her Majesty’s Revenue and Customs (HMRC), has updated its cryptocurrency taxation guidelines for businesses and individuals. On Nov. 1, the U.K. government tax agency, which manages taxes alongside other financial policies, released tax guidance updates that further clarify its stance on how businesses and individuals involved with cryptocurrency will be taxed. 

We should be happy with this latest updates on the taxation system implemented by the UK government comprehensively covering many areas related to cryptocurrency. At least, people of Britain now has a clear view on what to do and how tax can be calculated from hereon. Updates like this should be considered as milestones in the continuing history and adoption of cryptocurrency all over the world.

One of the many good things about getting recognized by the tax agency is that the asset is hereon considered to be legal. Just like the stance of the US government, cryptocurrency is still not considered as money in the UK but that is not very critical for now. Money or not, we know that when merchants are accepting Bitcoin the function is the same.

[malevolent]

Obviously gentlemand is far more qualified to answer this so I'll let him go through the details but I do share his view, as my first impression was that large scale mining is also subject to corporation tax.

No corporation tax if you don't incorporate, only personal income taxes then apply to a private person or that + social security taxes if it's a sole proprietorship/self-employment.

[gentlemand]

Speaking of the EU, imagine having to pay income tax on foreign currency gains with 18 currencies instead of the euro...

Unless you were a full time forex trader and even then it might qualify as gambling, it would be capital gains that applied in the UK and you have an allowance of about £11,000 per year.

If you happened to make a vast amount with your foreign currency just sitting there then it stands to reason that they'll go after it.

I'll bet more than a few people were caught out by the Brexit referendum result when it suddenly plunged. If you were in Euros or whatever during a house sale that might have been an unwelcome surprise.

Obviously gentlemand is far more qualified to answer this so I'll let him go through the details.

I've burnt everything the tax man has ever attempted to send me so look elsewhere for an expert.

[alyssa85]

Full text here:
https://www.gov.uk/government/publications/tax-on-cryptoassets/cryptoassets-tax-for-businesses#trading-in-exchange-tokens

A few things besides the whole trade exchange tax stuff is interesting and I do like it, one is about home (hobby) mining

For example, using a home computer while it has spare capacity to mine tokens would not normally amount to a trade. However, purchasing a bank of dedicated computers to mine tokens for an expected net profit (taking account the cost of equipment and electricity) would probably constitute trading activity. If the mining activity does not amount to a trade, the value (at the time of receipt) of any cryptoassets awarded for successful mining will generally be taxable as miscellaneous income, with any appropriate expenses reducing the amount chargeable.

If the miner keeps the awarded assets, they may have to pay Capital Gains Tax or Corporation Tax on chargeable gains when they later dispose of them.

So, there is a room for a bit of mining avoiding taxes while keeping a low profile, especially since there will be no VAT on crypto sales.

Also, there is a paragraph of allowable costs:

Certain costs can be allowed as a deduction when calculating if there’s a gain or loss, which include:
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advertising for a purchaser or a vendor

Does this mean you can deduct localbitcoin fees?
In all, it seems like they've done their homework quite diligently, they are covering everything, even hard and soft forks and airdrop.

As for the whole crypto is not money, nobody really gives a damn about semantics as long as they are making it legal to buy/sell/mine/use.

This was pretty interesting and I almost knew that they won't be able to tax the income still not realised by miners in Fiat because it's pretty hard to trace such income for authorities unless they go on to subpoena it. Coming to the case of expenses. It's always been a very subjective issue for most of the business about what expenses to claim. In general I advise my clients to claim all expenses which they have used until they have realized the income in their account as Expenses. This may include any transaction fees any local bitcoin fees. Infact i recommend people to take turnover on the basis of actual receipts in the bank.

British tax authorities like to make things easy for themselves - so taxing only when converting into fiat makes sense.

Also, the govt would quite like the City of London to become a cryptocurrency hub as well, so it's important not to squelch a new industry at birth. Especially if the EU goes in the opposite direction.

[barbara44]

The United Kingdom’s tax, payments and customs authority, Her Majesty’s Revenue and Customs (HMRC), has updated its cryptocurrency taxation guidelines for businesses and individuals.

On Nov. 1, the U.K. government tax agency, which manages taxes alongside other financial policies, released tax guidance updates that further clarify its stance on how businesses and individuals involved with cryptocurrency will be taxed. 

Read more HERE

For now, it is just few government that are accepting cryptocurrency as money while majority of them would prefer to see it as a digital asset which is why they also became interested in it having known that people use it for speculative purpose more, so you see why they are not so much threatened by it as much as they are even threatened about the Libra project.

It is for that reason that they became more interested in taxing it knowing completely well also that it could generate lots of money from them from the usage and from their trades that occurs through it. I see this s good move also, because it would not stop people from still using it as means of payment while the government should focus on the tax, before they know it, it will automatically become means of payment which would have been too late for them to stop it.