The U.K.’s tax authority has clarified its position on cryptocurrency taxation. According to Her Majesty’s Revenue and Customs, crypto asset exchange tokens such as BTC are considered as commodities, not as currency. However, this only extends to exchange tokens such as BTC, not security and utility tokens, whose guidance will be released at a later time.
The taxation of tokens used in trading will be determined by a number of factors, including the frequency and the intention. Where a business’s activities amount to a trade, the receipts and expenses will form part of the calculation of the trading profit, the regulator explained.
In cases where the tokens are part of an existing trade, the taxation will be on the trading profits. For instance, “if a company carrying on a trade accepts exchange tokens as payment from customers, or uses them to make payments to suppliers, the tokens given or received will need to be accounted for within the taxable trading profits.”
For the miners, they’ll be liable to taxation if the venture is commercial, such as the use of multiple computers and mining equipment as this would amount to trading activity. However, for those using a home computer’s spare capacity to mine cryptos, this will not amount to a trade and will thus not be subjected to taxation.
For those that choose to hodl the tokens they gain from mining, “they may have to pay Capital Gains Tax or Corporation Tax on chargeable gains when they later dispose of them.”
For the hard forks, it will come down to whether the exchange where a user holds the original tokens recognizes the new tokens. Even then, the taxation will be at the discretion of the HMRC,