C1.304 Cryptoassets—CGT treatment
Cryptoassets are cryptographically secured digital representations of value or contractual rights that can be transferred, stored or traded electronically. All cryptoassets use some form of Distributed Ledger Technology (DLT) database but not all applications of DLT involve cryptoassets. HMRC has issued a manual on the tax treatment of cryptoassets starting at CRYPTO10000 which deals with individuals and businesses.
HMRC does not consider cryptoassets to be currency or money1 and identify three types of cryptoassets as follows:
• exchange tokens
• utility tokens
• security tokens
Exchange tokens, often referred to as cryptocurrencies, utilise a DLT platform and include Bitcoin and Litecoin. They are not issued or backed by a central bank or other central body and do not provide the types of rights or access provided by security or utility tokens. They are used as a means of exchange or for investment. HMRC considers that at any time where an individual is UK resident the exchange tokens they hold as beneficial owner will be located in the UK2. TCGA 1992, ss 275 and 275A (see C1.604) are unlikely to apply in most cases. Therefore, a person who holds exchanges tokens is liable to pay UK tax if they are a UK resident and carry out a transaction with their tokens which is subject to UK tax.
Security tokens provide rights such as ownership, repayment of a specific sum of money, or entitlement to a share in future