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HMRC has published guidance on the potential liability to CGT, CT, IT, NIC, stamp duty, stamp duty reserve tax and VAT on transaction companies and other businesses (including sole traders and partnerships) may undertake involving cryptoasset exchange tokens, such as Bitcoin. The guidance does not cover transactions involving security tokens and utility tokens. HMRC published guidance for individuals on the treatment of cryptoassets in December 2018.
Exchange tokens are intended to be used as a method of payment and encompass ‘cryptocurrencies’ like Bitcoin. They utilise some form of ‘digitalised ledger technology’ and typically there is no person, group or asset underpinning these; instead the value exists based on its use as a means of exchange or investment. Unlike utility or security tokens, they do not provide any rights or access to goods or services. HMRC does not consider cryptoassets to be currency or money.
The type of activities which will be subject to tax and which involve exchange tokens would include:
buying and selling exchange tokens
exchanging tokens for other assets, including other types of cryptoassets
mining (see more details on this below)
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