In New Crypto Guidelines, British Tax Authorities Deny ‘Money’ Status to Cryptocurrencies

While global regulators have been working on new guidelines for digital currencies, the British tax, payments and customs authority - Her Majesty’s Revenue and Customs (HMRC) - has also updated its digital currency taxation guidelines for individuals and businesses.

Clarifying its position on cryptocurrency taxation, the HMRC has presented its views on how taxes will be applicable for crypto transactions along with explaining ways of accounting practices and filing tax returns.

The agency has also mentioned the taxation rules for exchange tokens and is currently working on rules for security as well as utility tokens.

Some of the taxations included by the HMRC for digital currency transactions include the capital gains tax, income tax, stamp taxes, corporation tax, and National Insurance contributions.

The agency has said that these taxes should be applicable to all companies involved in buying, selling, mining, or exchanging crypto tokens against other goods and services. Furthermore, the tax authorities explicitly mentioned that any of the cryptocurrencies available in the market do not fall in the ‘currency’ or ‘money’ category.

Instead of relying only on the application theory of cryptocurrency, the tax authority said that it will take a holistic approach while dealing with the tax provisions. The agency said that with the rapidly changing cryptocurrency sector, they will looks at the facts and past events of each case separately and will be formulating relevant tax provisions accordingly.

Earlier, the HMRC event thought of crypto trading as mere gambling. However, the tax agency has now clarified its position saying that the agency doesn’t consider buying/selling of digital currencies as any such activity.

The agency wrote: “The cryptoassets sector is fast-moving and developing all the time. The terminology, types of coins, tokens and transactions can vary. The tax treatment of cryptoassets continues to develop due to the evolving nature of the underlying technology and the areas in which cryptoassets are used. As such, HMRC will look at the facts of each case and apply the relevant tax provisions according to what has actually taken place (rather than by reference to terminology). Our views may evolve further as the sector develops”.