Taxation of crypto-assets
Produced in partnership with Etienne Wong of Old Square Tax Chambers
Taxation of crypto-assets

The following Financial Services guidance note Produced in partnership with Etienne Wong of Old Square Tax Chambers provides comprehensive and up to date legal information covering:

  • Taxation of crypto-assets
  • crypto-assets, exchange tokens, utility tokens and security tokens
  • Bitcoin
  • HMRC guidance, income tax, CGT, corporation tax
  • Loss and fraud
  • Employment tax, inheritance tax
  • SDRT and SDLT
  • VAT

STOP PRESS: On 1 November 2019, HM Revenue & Customs published guidance for companies and businesses on how tax transactions involving crypto-asset exchange tokens will be taxed. This covers liability to corporation tax, capital gains tax, employment taxes, VAT and stamp duties. Much will depend on whether or not the activity involving exchange tokens amounts to trading or not. This Practice Note will be updated shortly to reflect this guidance.

crypto-assets, exchange tokens, utility tokens and security tokens

It started with bitcoin (see below). An avalanche of other non-traditional currencies then followed, referred to at the time variously as digital currencies, virtual currencies and cryptocurrencies. Meanwhile, the landscape continued to evolve, and, in time, the focus shifted away from currency-equivalents to assets that serve different functions and achieve different aims. For a fuller discussion of these developments, see Practice Note: crypto-assets—essentials.

This Practice Note discusses UK tax in the context of crypto-assets and transactions in or involving crypto-assets.

crypto-assets, as the term is used by HMRC, refer to ‘cryptographically’ secured digital representations of value or contractual rights that can be:

  1. transferred

  2. stored

  3. traded electronically

The crypto-asset Taskforce’s, final report refers to three types of crypto-assets:

  1. exchange tokens—which are intended for use as a method of payment.

    As HMRC notes: typically, ‘there is no person, group or asset underpinning these, instead the value exists