Owner-Managed Businesses

Taxation of cryptoassets for business

Produced by Tolley
  • 05 Jan 2022 14:50

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Taxation of cryptoassets for business
  • Trading in cryptoassets
  • What is mining cryptoassets?
  • Accounting for cryptoassets
  • Cryptoassets treated as chargeable gains
  • Cryptoassets treated as intangible assets by companies
  • Cryptoassets treated and loan relationships
  • Cryptoassets and other areas of tax
  • Articles on cryptoassets for businesses

Taxation of cryptoassets for business

HMRC has published a manual on the tax treatment of cryptoassets starting at CRYPTO10000 which covers the treatment for both businesses and individuals. For businesses, this covers potential liability to CGT, CT, IT, NIC, stamp duty, stamp duty reserve tax and VAT on transactions companies and other businesses (including sole traders and partnerships) may undertake involving cryptoasset exchange tokens, such as Bitcoin.

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:

  1. buying and selling exchange tokens

  2. exchanging tokens for other assets, including other types of cryptoassets

  3. mining (see more details on this below)

  4. providing goods or services in return for exchange tokens

The normal tax rules will apply to the income, expenditure, profits, gains and losses on such exchange tokens with these amounts being calculated under generally accepted accounting practice (GAAP). The HMRC guidance provides more information on specific issues that arise from the utilisation of exchange tokens and these are summarised below.

Trading in cryptoassets

As with other activities of a business,

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