Cryptocurrencies are becoming an increasingly important part of the global financial landscape. Salman Anwar looks at the UK’s tax authority’s approach to bitcoin and the like.
The purpose of this article is to highlight the way HMRC investigates cases involving cryptocurrencies. However, first it is important to set the scene on HMRC’s views of these new assets.
Background
Just like the world of cryptocurrencies (or ‘cryptoassets’, as HMRC prefers to call them), HMRC’s view on the taxation of these assets has evolved somewhat over the past few years. This is demonstrated by subtle contrast in wording of the following passages:
HMRC’s policy paper of 3 March 2014, titled ‘Revenue and Customs Brief 9 (2014): Bitcoin and other cryptocurrencies’ (as can be found in the National Archives) – Whether any profit or gain is chargeable or any loss is allowable will be looked at on a case-by-case basis taking into account the specific facts. Each case will be considered on the basis of its own individual facts and circumstances. The relevant legislation and case law will be applied to determine the correct tax treatment. Therefore, depending on the facts, a transaction may be so highly speculative that it is not taxable or any losses relievable… For example gambling or betting wins are not taxable and gambling losses cannot be offset against taxable profits.
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