Only yesterday, articles were posted all over the web about how Britain is beginning to really welcome Bitcoin and other cryptocurrencies. And today, the HM Revenue & Customs has announced their official position on taxing Bitcoin and similar cryptocurrencies.
And the news it good, very good for Bitcoin ethusiasts. For the purposes of taxation, Bitcoin will essentially be treated as any other currency.
The key points that Bitcoiners will be interested in are:
- Income from mining cryptocurrencies is VAT exempt
- Charges for arranging transactions in cryptocurrencies is VAT exempt
- Cryptocurrencies transferred to fiat is VAT exempt
- VAT is due (as normal) for selling goods/services paid in cryptocurrencies (calculated in GBP at point of transaction)
- Corporation Tax: no special rules apply, it will be treated as foreign exchange and loan relationships
- Income Tax: business profits from crypto-currencies taxed as normal income
- Capital Gains: gains or losses from crypto-currencies allowable as CG for an individual or corporation tax for a business
- Gambling gains are not taxable although losses cannot be offset against other gains (which is the same as fiat)
Here’s a quote of some of the main details:
1.Income received from Bitcoin mining activities will generally be outside the scope of VAT on the basis that the activity does not constitute an economic activity for VAT purposes because there is an insufficient link between any services provided and any consideration received.
2.Income received by miners for other activities, such as for the provision of services in connection with the verification of specific transactions for which specific charges are made, will be exempt from VAT under Article 135(1)(d) of the EU VAT Directive as falling within the definition of ‘transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments.’
3. When Bitcoin is exchanged for Sterling or for foreign currencies, such as Euros or Dollars, no VAT will be due on the value of the Bitcoins themselves.
4. Charges (in whatever form) made over and above the value of the Bitcoin for arranging or carrying out any transactions in Bitcoin will be exempt from VAT under Article 135(1)(d) as outlined at 2 above.