Her Majesty’s Revenue and Customs (HMRC) office, the top office for taxes in the UK, recently released its new guidelines for cryptocurrency taxation.
They will apply to both individuals and businesses. This is a major move by the office since it clears up the taxation rules for cryptocurrency in the UK. Cryptocurrencies laws are not very clear in the UK and these fresh guidelines will be a major help.
The most important guideline in the published list is regarding how the UK will look at cryptocurrencies. Under the new rules, cryptocurrency will not be considered currency or money.
It will also not be classified as stocks or marketable assets. This means that laws that cover these particular assets will not apply to cryptocurrency in the UK.
The result is that most of the time, cryptocurrencies will not have to pay stamp taxes. The only time stamp taxes will be levied is if they are used in debt transactions. Additionally, in some circumstances, crypto assets can be considered as stocks or marketable securities. This means that they will also have to pay the stamp tax. This is done on a case-to-case basis though and is not connected to crypto assets themselves.
The clarifications in the guidelines also guide people on how various types of taxes would be applied to cryptocurrencies. This is especially if they are being handled by a business. To make things simple, any business that is involved in crypto asset trading in one way or another will have to pay a tax. The amount is dependent on the various factors of the business.
In its statement, the HMRC wrote,
HMRC will consider each case on the basis of its own facts and circumstances. It will apply the relevant legislation and case law to determine the correct tax treatment (including where relevant, the contractual terms regulating the exchange tokens).
To allow the tax offices a chance to judge each case, cryptocurrency companies will need keep records of each cryptocurrency transaction they make. These would be in pound sterling, along with records of how the valuation process into pounds was done.
Updated Guidelines
This is not the first time that the HMRC published tax guidelines for cryptocurrencies. The last time was back in December 2018 and the only thing that the tax office wanted at the time was for individual traders to keep records of their crypto transactions in pound sterling.
Cryptocurrency companies were also asked to report their operations for tax compliance purposes in a separate requirement that was released just this year. To find out more information on these proposed taxes, please check the HMRC website.
