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Her Majesty & # 39; s Revenue and Customs (HMRC) published yesterday a reference document with the guidelines on the taxation of cryptocurrencies for individuals. The good news is that no new punitive fiscal measures are applied to the crypt, which essentially falls under the existing tax regimes.
What tax is applied?
Having defined what is a crypto-asset, the document notes that the nature of the sector requires a continuously developing tax perspective. It breaks the difference between exchange token, utility, and security, although internal orientation specifically applies to exchange tokens.
Tax treatment, however, does not depend on the definition of the token, but on its nature and use. In simple terms, the crypto-goods received as a form of payment will be subject to income tax. Those held as personal investments will be subject to capital gains tax, but only available.
Tax liabilities of cryptocurrency
Income taxes and national insurance are subject to active crypts received in the following circumstances:
- Non-cash payment for work or services rendered
- Mining fees or premiums – where mining is not to the extent that it is a taxable trade.
- Financial negotiation in cryptocurrency – where the level of organization and frequency amounts to financial trading.
Given that the crypto-assets acquired through these activities count for the total income from work, the level of tax payable depends on the tax bracket.
Tax on capital gains
In most cases, HMRC expects that an individual's purchase and sale of crypto-assets constitute investment activities. As with any other asset, this requires payment of the tax on any profits realized at the time of sale.
For crypto-activity purposes, disposal may include:
- Selling for money
- Exchange for other types of crypto-assets
- Using as payment for goods or services
- Giving away to another person – who is not a spouse or a partner
Charitable donations are not usually subject to capital gains tax. Special rules apply to aggregate assets (those that a person acquires over time and at different prices), as regards the initial purchase cost.
The rates of capital gains tax are 20% for taxpayers with higher or additional rates and 10% for base rate tax payers. If your earnings plus your income fall into your personal allowance, then it is due to the zero tax.
The bottom line
This is a very clear and well-written document, and it is refreshing to see the British government banish the "bad crypto!" Mentality, favored by some. By treating crypto-assets as revenue and / or regular investments, it is appropriate to simplify their management, as most taxpayers (and all tax professionals) will already know these processes.
It is interesting to note that the Bank of England has published a Survey on Twitter this week, asking interviewees for the best way to receive Christmas money. No prizes to guess what's coming up. Although perhaps someone should tell the BoE that "bank transfers" are "digital currency".
Furthermore, it may be the acceptance of bitcoins and other cryptocurrencies by the government for the payment of taxes. At the beginning of this month, Bitcoinist reported that the UK deputy, Eddie Hughes, asked the local authorities to take a leading role and accept payments with Bitcoin.
The cryptocurrency tax guidelines help traditional adoption? Let us know in the comments below!
Images courtesy of Shutterstock, Twitter
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