HMRC to change Bitcoin tax rules


Digital currencies such as Bitcoin are to be subject to corporation tax, income tax and capital gains tax, according to guidelines set out by HMRC.

The document does not refer to cryptocurrencies as currency', but states they will be treated the same way as traditional monies like pound sterling or the dollar.

Previously, Bitcoin and its peers, such as Litecoin and Dogecoin, had been treated as vouchers and thus subject to VAT, but this has now been scrapped.

The change in tax regime means users of digital currencies will be charged depending on their income and profits, rather than a flat 20 per cent per transaction.

The highest cryptocurrency earners in the UK could be charged up to 45 per cent in income tax, up to 28 per cent in capital gains tax and up to 21 per cent in corporation tax.

The move sees the UK following in the footsteps of Germany, which also recently switched away from VAT to charging income and profit-based taxes, and is part of a wider trend to normalise the way cryptocurrencies are dealt with.

Although the Financial Conduct Authority, which oversees the financial services industry in the UK, has said it does not regulate digital currencies and has no intention of doing so, the European Banking Authority (EBA) is examining their use and considering possible Europe-wide regulation.

The body has created a taskforce to examine the risks to consumers using Bitcoin and others, as well as looking at the use of cryptocurrencies for money laundering and the purchase of illegal goods, and will discuss what kind of regulations, if any, should be put in place.

Any laws implemented off the back of this consultation would affect all European Union residents, including those in the UK.

The change in HMRC's treatment of cryptocurrencies follows the collapse of Mt. Gox, formerly the largest Bitcoin exchange, which filed for bankruptcy on 28 February.

The organisation confessed it may have lost up to half a billion dollars worth of coins following an attack on its systems, affecting 60,000 customers in Great Britain and 180,000 in the US.

The vice finance minister of Japan, where the exchange was headquartered, has since called for global uniformity in the regulation of Bitcoin.

Jane McCallion
Managing Editor

Jane McCallion is ITPro's Managing Editor, specializing in data centers and enterprise IT infrastructure. Before becoming Managing Editor, she held the role of Deputy Editor and, prior to that, Features Editor, managing a pool of freelance and internal writers, while continuing to specialize in enterprise IT infrastructure, and business strategy.

Prior to joining ITPro, Jane was a freelance business journalist writing as both Jane McCallion and Jane Bordenave for titles such as European CEO, World Finance, and Business Excellence Magazine.