Risk is inherent in crytpocurrency activity, but one area where uncertainty should be mitigated is the tax treatment of your crypto transactions.
The challenge for individuals and companies engaged in cryptocurrency activity is making sense of this emerging area of taxation.
The UK position of tax on cryptocurrency is governed by a set of nascent tax rules, supported by a developing body of case law and other related pieces of legislation that pre-date the existence of cryptocurrencies.
HMRC’s focus remains – for the time being at least – the use of digital currency for criminal purposes, such as the laundering of illicit funds, and not the development of a specific tax on cryptocurrency framework.
As cryptocurrency enters the mainstream and becomes an industry in its own right, this current position may in time alter, with the income generation potential for the Government too attractive to ignore.
But for individuals and companies active in cryptocurrency today, the duty remains to take a responsible and compliant approach to tax.
Under prevailing HMRC guidance, published in 2014, it is the activity in question that will determine the tax treatment, and not the underlying asset or type of cryptocurrency.
As a general position, this provides a degree of clarity on which to proceed with effective tax planning, as with any other form of financial activity.
Specialist tax advice in this area will help to ensure you are meeting your liabilities to UK tax on cryptocurrency and your disclosure obligations, while maximising opportunities for tax-efficient structuring and planning of your activity.
Here to help
ETC is at the frontline of this fast-developing area. We are advising individuals and companies holding and transacting in cryptocurrencies, including Bitcoin, Litecoin, Ethereum, ZCash, Dash, Ripple, among many others.
We also accept payment in crypto, subject to prior agreement.
Whether you are looking to set up a cryptocurrency fund or are already actively engaging in cryptocurrency activity – buying, selling, holding, mining – we will assess whether your activity falls under the classification for personal, speculative, trade, or investment.
Looking at your specific circumstances, we will analyse the tax treatment of your activities, assessing where chargeable gains or allowable losses arise on your cryptocurrency transactions, and where exemptions may apply, for example, to transactions considered as ‘highly speculative’.
As specialist UK chartered tax advisers, we offer planning advice to ensure your profits are structured and taxed as efficiently as possible, taking your wider circumstances into consideration, including your residence status, domicile, occupation and history of cryptocurrency activity.
We also provide advice on tax return disclosures, particularly in respect of tax-free positions where supportive rationale to HMRC may be advisable.
For advice on the taxation treatment of your transactions and dealings in cryptocurrency, contact us.