UPDATE (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.

Therefore, depending on the facts, a transaction may be so highly speculative that it is not taxable or any losses relievable."Businesses 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.bitcoin etf explainedThe result, however, was that HMRC opened up discussions with the community.bitcoin haendlerRobinson 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.bitcoin qt dump all private keys

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.Further, 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.mol bitcoinThe news is notable as most recent regulatory statements in the wake of operational issues at the now-bankrupt Japan-based exchange Mt.litecoin difficulty scheduleGox had been trending negative.litecoin suggested difficultyVietnam 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.

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 wrongSkip to main content You are hereHome Cryptic currency Sarah Saunders The mysterious world of bitcoin Related articlesPrinter-friendly version Back to topThe UK's tax authority has scrapped plans to charge value added tax (VAT) on Bitcoin trading.In new guidance, HM Revenue & Customs also said it would not levy the 20% tax on the creation, or so-called 'mining', of the virtual currency.The move comes just days after the collapse of leading Bitcoin exchange, MtGox, and with it the loss of almost $500m (£300m) in customer deposits.HMRC said corporation and income taxes would still apply.The global market for Bitcoins, a virtual currency created, or 'mined' through complicated computer algorithms, is worth about $7 billion (£4.2bn) at current market rates.

Countries and their tax authorities have been grappling with how to regulate it, with some seeing it as a route for tax evasion or money laundering.Russia has declared transactions illegal, China has banned its banks from handling Bitcoin trades, and there have been calls for the US to do the same.Singapore has imposed a tax on Bitcoin trading and using it to pay for services, after classifying it as goods, rather than a currency.However, HMRC's guidance issued on Monday, said VAT would not be levied, on the basis of EU rules that apply to currencies.It said Bitcoin trading and other activities, like charges for verifying transactions, "are exempt because they fall within the definition of 'transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments'".Bitcoin traders and supporters had been calling for HMRC to scrap its VAT plans for the currency, arguing it would make their businesses globally uncompetitive, or even unviable.But VAT will apply to suppliers of goods and services sold in exchange for Bitcoin, based on the sterling value of the virtual currency at the point of sale, HMRC said.And the profits or losses of companies using Bitcoins, and on exchange movements between currencies, will be subject to corporation tax, the government agency added.