UK Tax Authority: Cryptocurrencies Are Not Money
The United Kingdom’s (UK) tax, payments, and customs agency — Her Majesty’s Revenue and Customs (HMRC)— has updated its stance on digital asset taxation. Notably, cryptocurrencies will not be taxed as money, though certain taxes will still apply on a case-by-case basis.
Crypto Taxes in the UK Explained
HMRC has released a digital asset tax framework for both businesses and individuals. The frameworks not only outline how specific transactions will be taxed, but provides guidance on filing tax returns as well.
Most importantly, HMRC says cryptocurrencies are neither money nor currency, and will not be treated as such.
Taxes will still be paid, however.
Companies which purchase, sell, trade, or mine digital assets — or accept such digital assets in exchange for goods and services — must pay taxes. Depending on the specific transaction, the tax could be capital gains, income tax, corporation tax, stamp taxes, or National Insurance contributions.
HMRC also recognized a quickly advancing digital asset space and noted that it will consider each case on a case-by-case basis, instead of a forced black-and-white approach.
Previously, cryptocurrency trading was put in the same tax category as gambling, which is no longer the case.
Earlier this year, HMRC reportedly asked cryptocurrency exchanges to provide a history of user identities and corresponding transactions for the previous three years. HMRC was trying to recover unpaid taxes, suggesting the regulator is only trying to gather those from the past three years.
HMRC said guidelines for both security tokens and utility tokens will be published in the near-future.
The situation differs from that in the United States, where cryptocurrencies are treated as property and subject to capital gains tax. However, the most recent official update from the IRS was in 2014, which has prompted US Congress to urge the IRS for an updated clarification.
In an official response, the IRS says an update is coming.
What do you think about HMRC providing an updated tax framework for digital assets? How should cryptocurrencies be taxed? Let us know what you think in the comments section below.
Image courtesy of the Financial Times.