As the old saying goes, in this world, nothing is certain except death and taxes.<\/p>\n
<\/p>\n
So, it was inevitable that HM Revenue & Customs (HMRC) would turn its attention to cryptocurrencies.<\/p>\n
This is an area of which we hear plenty about, but few know much about, except they are a digital currency with no bank or Government backing.<\/p>\n
HMRC is now demanding that taxpayers under investigation declare cryptocurrency and assets they have in e-money wallets and are treating them as subject to Capital Gains Tax (CGT).<\/p>\n
While HMRC has always expected taxpayers to declare all of their assets on the\u00a0statement of assets\u00a0form during an investigation, the tax body is now being explicit in its demands for cryptoassets.<\/p>\n
Previously\u00a0HMRC suggested\u00a0that trading cryptoassets could be \u2018speculative\u2019 and subject to the same rules as gambling \u2013 so exempt from tax.<\/p>\n
Cryptocurrencies including Bitcoin, Ethereum and Dogecoin, are digital currencies that are decentralised \u2013 that is, not backed by banks and governments. Transactions are stored and recorded through a secure database called the blockchain, the technology behind cryptocurrency.<\/p>\n
HMRC treats gains on cryptoassets or tokens as they describe them, in the same way as gains on other investments. This means gains are subject to\u00a0Capital Gains Tax (CGT), which taxpayers report on a\u00a0Self Assessment tax return\u00a0when they make more than the annual tax-free income threshold of \u00a312,300.<\/p>\n
You might need to pay CGT when you:<\/p>\n
You can deduct certain allowable costs when working out your gain, including the cost of:<\/p>\n
You can also deduct a proportion of the pooled cost of your tokens.<\/p>\n
You cannot deduct costs:<\/p>\n
HMRC has always asked taxpayers under investigation to include detailed information about all of their assets, but its updated statement of assets form should act as an important prompt to declare cryptoassets like Bitcoin.<\/p>\n
Ultimately, it appears that HMRC\u2019s aim is to leave any ambiguity about the tax treatment of cryptoassets behind.<\/p>\n