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Cryptoassets – new guidance on tax treatment

03 January 2019

New guidance on the tax treatment of cryptoassets, such as Bitcoin, has been unveiled by HMRC.

The taxman confirmed that it expects the buying and selling of crypoassets by individuals to normally fall within the scope of an ‘investment activity’, and subject to Capital Gains Tax. HMRC felt it would be rare for individuals to be transacting with sufficient scale and organisation to be considered to be trading.

The ATT’s Jon Stride pointed out that in the new guidance HMRC’s position on whether or not some transactions in cryptoassets could amount to gambling has changed. He explained: “Previous guidance suggested that highly speculative transactions might be considered gambling, which is effectively outside the scope of tax. In their latest guidance, HMRC has confirmed that they do not consider that the buying and selling of cryptoassets will be the same as gambling.”

HMRC also looked at the tax position when individuals receive income from related activities such as ‘mining’ or ‘airdrops’, where the individual has carried out some work/activity to be eligible for the allocation. Provided that the individual is not trading, such income will be taxable as miscellaneous income, and, if receipts are less than £1,000 in the tax year, may well be covered by the new trading allowance.

Stride felt despite this new guidance there remain some unresolved issues, including where a digital token, such as cyproassets, can be considered to be located for legal and tax purposes. He emphasised that HMRC has promised to address this issue in future updates.

*Guidance on tax issues for businesses and companies who engage in crypoasset transactions is expected in early 2019.

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