Drawing revenue by using cryptocurrency (e.g. bitcoin etc.) through multiple exchanges has become a new technique of making a profit. In UK, income derived from virtual currency such as profits from the transfer of assets, income from a job, business income is taxed on a related principle as income derived from traditional money. HMRC has already published a guideline about UK crypto taxation.
As regards the taxation of digital profit, the investment or sales price or derived income has to be transformed into fiat at the exchange rate of virtual currency (market price) implementing on the date of receipt of the interest or values. The part of the profit or loss usually depends on whether the digital currency is an asset in the hands of the people. People commonly recognize profit or loss on the transaction or exchange of virtual currency that is a capital asset. For example, stocks, bonds, and other investment holding are usually capital assets.
HMRC and UK Crypto Taxation
In the UK, HMRC sets the revenue and customs policies. HMRC (Her Majesty’s Revenue and Customs) is a non-ministerial office of the UK Government which is responsible for the UK crypto taxation, the payment of some kinds of state assistance and the management of other regulative administrations including the national minimum wage. Here’s a summary of cryptocurrency taxation in the UK.
According to HMRC policy paper, any crypto profits made are subject to the same taxation as a salary – i.e. income tax, national insurance augmentation. It has also recognized that cryptocurrencies may be kept as a property or utilized to pay for goods or services at traders where they are received. In the UK, there are already a number of terminals, such as bars, eateries and internet retailers, that take payment by cryptocurrency.
The HMRC guideline is for people who are getting profits or contrarily earning income, in whatever manner, from ventures including Bitcoin or other cryptocurrencies such as
VAT treatment of Cryptocurrencies:
Nevertheless, in all cases, VAT is payable for any goods or services traded in exchange for any cryptocurrency. The cost of the number of goods or services on which VAT is payable is the sterling value of the cryptocurrency at the point the transaction.
In the UK, tax practice of any transaction comprising the application of cryptocurrencies is being examined based on its own specific realities and conditions. According to HMRC, the tax processing of cryptocurrencies and the foreign exchange are still being examined but because of the “evolving” characteristics of the cryptocurrency market, the HMRC is thinking about further future guidelines.
Disclaimer: This information should not be interpreted as an endorsement of any cryptocurrency. It is not a recommendation to trade. The crypto market is full of surprises and overhyped assets. Do your research before buying anything. Do not invest more than you can afford to lose.
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