Skip to main content Policy paper Revenue and Customs Brief 9 (2014): Bitcoin and other cryptocurrencies From: HM Revenue & Customs Part of: Revenue and Customs Briefs and Tax agent and adviser guidance Published: 3 March 2014 HM Revenue and Customs tax treatment of income received from Bitcoin and other cryptocurrencies.Help us improve GOV.UK Don’t include personal or financial information like your National Insurance number or credit card details.What you were doing What went wrongUPDATE (3rd February, 17:19 GMT): HMRC has now published an official brief, outlining its position on the tax treatment of income derived from bitcoin-related activities.The UK's tax agency has reversed an earlier ruling that classified virtual currencies as gift vouchers, exempting digital currency trading from a 20% value added tax (VAT).HM Revenue and Customs (HMRC), the UK's customs and tax department, has classified virtual currencies as assets or private money, not as vouchers that required a tax on the value of the coins.

Tom Robinson, co-founder of London-based digital currency storage specialist Elliptic and a director of the soon-to-launch industry group U.K.Digital Currency Association, lauded the decision by the tax agency, telling CoinDesk: "I think this is the most progressive treatment of cryptocurrencies in the world.This is the most forward thinking and comprehensive advice in regards to taxation."HMRC had previously indicated it would consider rethinking its treatment of digital currency in December.Reports say other taxes would still apply to businesses that buy, sell or exchange bitcoin.However, notably, bitcoin businesses will not be charged a tax on margins.The news follows reports that the UK's Payments Council, the organisation that sets strategy for payments, is assessing digital currencies, and amid increasing innovation from the local community that has seen the opening of bitcoin ATM alternatives and release of physical bitcoin price tags.In its formal Revenue & Customs Brief, published on Monday, the HMRC pointed out that for VAT purposes bitcoin and other digital currencies will be treated as follows.

With VAT out of the way, the HMRC turned to Corporation Tax, Income Tax and Capital gains Tax.It is important to note that there is no clear rule that applies to all activities and organisations.The brief explains: "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.litecoin price redditTherefore, depending on the facts, a transaction may be so highly speculative that it is not taxable or any losses relievable."bitcoin seminar reportBusinesses which accept payment in bitcoins will see no change in the way revenue is recognised and how taxable profits are calculated: Elliptic and other UK-based bitcoin businesses had earlier contacted the HMRC in an attempt to inspire UK lawmakers to rethink their classification of bitcoin, suggesting that the VAT would discourage UK consumers from investing in the ecosystem and make it harder for domestic companies to compete globally.express coin bitcoin review

The result, however, was that HMRC opened up discussions with the community.Robinson indicates that in early meetings, UK lawmakers asked questions about various digital currency activities, such as mining, though the larger focus was the overall taxation of the new currencies.The news spread quickly across the bitcoin community, with many lauding it as a validation of bitcoin at a time when the industry is in need of good news.bitcoin nucleoFurther, though undeniably positive, others in the community suggested that still more work needs to be done to ensure the growth of digital currencies in the UK.ethereum ubuntuThe news is notable as most recent regulatory statements in the wake of operational issues at the now-bankrupt Japan-based exchange Mt.bitcoin replace usdGox had been trending negative.litecoin mining with 2 gpus

Vietnam became the latest to speak out against bitcoin this week, citing Mt.Gox specifically, though over the last month, a slew of countries - from Hungary to Cyprus to Kazakhstan - have all issued warnings.Image credit: Value added tax visualization via Shutterstock The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies.bitcoin is gold bitcoin is silver what is bronzeSkip to main content You are hereHome Cryptic currency Sarah Saunders The mysterious world of bitcoin Related articlesPrinter-friendly version Back to topmoon bitcoin tricksSkip to main content What is the issue?The understanding of bitcoin operations together with any hobbies that can earn (and lose) money from a tax viewpoint and how these activities are treated from a tax planning angle together with a compliance on tax returns What does it mean for me?

The need to review bitcoin activity, and indeed all clients’ affairs, on a case-by-case basis and to obtain strong evidence in each instance What can I take away?The importance of ongoing ‘fact finds’ of any changes and developments in clients’ tax affairs, together with the need to request information from clients regarding all new activities, paying special attention to grey areas, unusual transactions and to support all claims with evidenceHM Revenue & Customs plans to change how Bitcoin is taxed, dropping the guidance that sees it qualify for the 20pc value added tax (VAT).The taxman is considering treating Bitcoin, and other virtual currencies, as an asset or as private money, rather than a voucher as was previously the case.The move follows a surge in demand for the virtual currency.Bitcoin's value has been driven up by speculators and individuals attempting to circumvent currency restrictions, and hundreds of businesses have begun to accept it as payment.Authorities are also concerned about Bitcoin's potential as a device for money laundering.

The value of one Bitcoin on most exchanges has risen from under $50 a year ago to more than $1,200 during December.It currently sits slightly below $1,000 on Mt.Gox, one of the most popular trading exchanges.VAT is charged at 20pc for any business above a threshold of £79,000 in annual revenues.For Bitcoin sellers who buy in bulk and sell at a low margin, this can make sales above that threshold unprofitable.Retailers and other businesses that accept Bitcoin payments, meanwhile, potentially face a "double tax" on transactions.The potential reclassification follows a meeting between members of the Bitcoin community and HMRC in December, when the tax authorities agreed to assess its current classification.One option is to treat Bitcoin as an asset, and to charge capital gains tax on the difference between the buying and selling price.This would eliminate the problem of reaching a sales threshold, because tax would be levied on gains, rather than revenue.A HMRC spokesman said: "There is a VAT exemption for currency transactions but the currency in question must be legal tender.