Her Majesty’s Revenue and Customs (HMRC) has updated its guidelines on the taxation of transactions involving crypto assets. The United Kingdom’s tax authority clarifies its stance on cryptocurrencies and explains which taxes apply to specific activities carried out by business entities and private individuals.
Taxable Activities Listed
Multiple tax tools now exist to help crypto users and businesses from the industry with tax reporting. But in a field as fluid as the crypto space, regulations change rapidly. On Nov. 1, HMRC published updated policy papers concerning crypto transactions undertaken by companies, other businesses such as sole traders and partnerships, and individuals.
The agency notes that the documents deal with the tax treatment of “exchange tokens,” explicitly mentioning bitcoin. They do not apply to tokens issued in initial coin offerings (ICOs). The taxation of security and utility tokens will be addressed separately in the future. Taking into account the specifics of the fast-changing industry, HMRC says it will look at each case and apply the relevant provisions.
The tax office has listed a number of crypto-related activities that give rise to tax obligations. These include buying, selling and exchanging tokens for other assets, including cryptocurrencies. Crypto mining has been mentioned as a taxable economic activity. Businesses providing goods or services in return for digital coins also owe taxes to the British government.
The guidelines review the applicable taxes as well and corporate entities conducting any of the aforementioned activities are likely to be liable to pay one or more of the following taxes: capital gains tax, corporation tax, income tax,