UK Cryptocurrency tax update
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Originally Posted On: https://www.f9consulting.co.uk/uk-cryptocurrency-tax-update/
Worried about tax on your Cryptocurrencies? Did you get in early on Dogecoin? Maybe you are actively trading Bitcoin, Filecoin, XRP or any one of the hundreds of other Crypto options? If so, this article is for you…
Worried about tax on your Crypto?
Over the past few years, there has been a significant increase in the number of people holding, or actively “Trading” Cryptocurrency assets, many with phenomenal financial returns. Platforms like Binance, Revolut and eToro have made the purchasing and trading of Cryptocurrency easily accessible to everyone, with the lure of huge profits enticing more and more people to invest in Crypto.
Cryptocurrency Exchanges to incur 2% Transaction Tax
HMRC has confirmed that cryptocurrencies like Bitcoin, Ethereum and Cardano are not commodities or money, and therefore will not be exempt from the newly introduced Digital Services Tax (DST).
DST tax, which came into force last year, places a 2% sales levy on online marketplaces, across all transactions.
This tax was introduced to tax digital giants such as search engines and social media services that have a global revenue of over £500m and UK sales of over £25m.
The tax will remain in place until the OECD’s global 15% corporate tax rate comes into effect.
In an update to its guidance, HRMC has stated that cryptocurrencies ‘do not qualify for an exemption granted to financial marketplaces’ with HMRC stating that it ‘does not recognise cryptocurrencies as financial instruments.’
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‘There are a wide variety of crypto assets, each with different characteristics. Since cryptocurrencies do not represent commodities, financial contracts, or money, it is unlikely that crypto asset exchanges can benefit from the exemption for online financial marketplaces.’
‘A specific reference to Digital Services Tax, therefore, highlights that the online financial marketplace exemption is unlikely to be available to cryptoasset exchanges that are online marketplaces because their activities do not involve facilitating the trading of financial instruments, currency or foreign exchange as required by the exemption.’
Given this, we can expect the cost of transacting across these recognised exchanges to increase vastly. Will this push digital currency further underground, or will it finally bring it to the fore? Only time will tell!
If you have Crypto assets and are worried about Cryptocurrency tax, would like advise on the tax position, or to discuss tax mitigation, do not hesitate to contact us for a FREE consultation.