The Tax Man Cometh

[jim618]

I had an interesting letter from the UK tax office (HMRC) today.
It was asking whether I was eligible for tax self assessment. This is when you declare you income and tax to pay and is used for pretty much anyone who is not working for a big company.

I have been fortunate to be able to work on bitcoin and MultiBit solidly for the last tax year so no doubt my lack of income has flagged me on their bigiron computer. (I do not claim any benefits from the state either so am not on that computer system either).

If they do their due diligence I would expect that they do a tax audit on me (I would be surprised if they did not). Of course if I write code and give it away for free there is no taxable income but what about the donations people have sent to multibit.org ?

It is my name on the bottom of the website and I control the private key for the donations address. It will be interesting to see what happens. To my knowledge it has not even been officially decided if bitcoin is 'money' yet.

Normally I would not make my dealings with the tax man public but I think this is of sufficient wider interest that I will scan the documents involved (edited lightly to maintain privacy) and then post them here so that they are a matter of public record.

[ribuck]

It was asking whether I was eligible for tax self assessment.

It's a form letter that went out to millions of people.

[jim618]

Oh yes, it goes to pretty much everyone who is not on PAYE (pay as you earn tax deductions for non UK readers)

The interesting part is how the bitcoin donations are considered.

[PatrickHarnett]

Is it effort expended with expectation of monetary reward?

A donation of a facebook "like" might be considered to have value (god knows why), or what about someone sending you a discount voucher.  Is a free copy of a piece of software arriving in you inbox with a $1 value income?  Most likely not.

If your business was the solicitation of donations, then that would be income as it is effort expended.  I think the tax man <yawns> and looks for a better target.

[jim618]

Thanks for your clarification.
Yes I would be happy if the taxman yawns and moves along to the next.

[Rothgar]

And of course you have expenses of running the website.  It's not pure profit it went to cover expenses.  IANAL and I don't live where you do.

[zerokwel]

I live in the uk and consider bitcoins a virtual item that have 0 value until sold. (bit like wow gold). Sometimes I convert them to a real item which I consider to have 0 value until sold. And if I ever sold the item for cash no paper trail.

That's the way I see it.