Commentary

RCB/9/14 Tax treatment of activities involving Bitcoin and other similar cryptocurrencies

Part V16 Forms and other HMRC material

RCB/9/14 Tax treatment of activities involving Bitcoin and other similar cryptocurrencies

RCB/9/14 Tax treatment of activities involving Bitcoin and other similar cryptocurrencies

Revenue & Customs Brief, Issue 9. 3 March 2014

Purpose of this Brief

This brief sets out HM Revenue & Customs (HMRC) position on the tax treatment of income received from, and charges made in connection with, activities involving Bitcoin and other similar cryptocurrencies, specifically for Value Added Tax (VAT), Corporation Tax (CT), Income Tax (IT) and Capital Gains Tax (CGT).

Readership

Anyone making charges or otherwise receiving income, in whatever form, from activities involving Bitcoin (or other cryptocurrencies), including—

  1.  

    —     Bitcoin miners

  2.  

    —     Bitcoin traders

  3.  

    —     Bitcoin exchanges

  4.  

    —     Bitcoin payment processers

  5.  

    —     Other Bitcoin service providers

Background

Bitcoin is seen as the world's first decentralised digital currency, otherwise known as a “cryptocurrency”. The advent of cryptocurrencies such as Bitcoin is a new and evolving area and determining their legal and regulatory status is ongoing. Cryptocurrencies have a unique identity and cannot therefore be directly compared to any other form of investment activity or payment mechanism.

HMRC understands that Bitcoin operates via a peer to peer network, independent of any central authority or bank. All functions such as issue, transaction processing and verification are managed collectively by this network. All Bitcoin transactions are recorded in a shared public database called a “block-chain”. New Bitcoin is produced when a new block is attached to the chain. A new block can only be added to the chain when the answer to a complex cryptographic algorithm is solved. Participants in this activity are known as

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