In the dynamic realm of cryptocurrency, staying informed about evolving tax regulations is paramount. Here’s a concise breakdown of key considerations and recent developments provided by HMRC:
Crypto as Shares, Not Cash:
HMRC views cryptocurrency as shares, leading to potential income and capital gains taxes based on individual circumstances.
Guidance Over Legislation:
While specific crypto legislation is yet to be established, adherence to HMRC’s general tax rules and the CRYPTO10000 manual is crucial, despite its non-exhaustive nature.
Mining and Trading:
Mining activities may be treated as ‘trading,’ and most crypto dealings typically fall under capital gains or corporation tax.
Selling or using crypto can trigger capital gains tax, following standard CGT rules and exemptions.
Corporate Loans and VAT:
Traditional loan rules don’t apply, but VAT is relevant for goods/services sold for crypto. Notably, mining-related tokens are VAT-free.
Decentralized Finance (DeFi) and HMRC:
HMRC is reevaluating tax implications for DeFi, indicating that CGT may not apply for token swapping without converting to cash.
Reporting Rule Updates:
Commencing April 2024, crypto capital gains must be reported separately in tax returns.
The CIOT suggests treating crypto as a new property type and proposes updates to tax rules, although these are yet to be incorporated into the Autumn Statement.
Stricter oversight for cryptocurrency may be on the horizon under the Financial Services and Markets Act. Notably, NFTs are not classified as investments by the government.
Global Reporting Framework:
The UK is set to join OECD’s CARF for crypto information exchange by 2027.
HMRC’s Cryptocurrency Emphasis:
A voluntary disclosure facility for unpaid crypto taxes is now open