The rapid rise in the value of Bitcoin has been in the news recently, with investors reminded to account for any gains (or losses) on their self-assessment tax returns.
Whilst some investors have held out hope that trading in Bitcoin is the equivalent of gambling because of the speculative element involved and, therefore, profits are not taxable as ‘winnings’, some tax advisers have speculated whether sufficiently frequent trading of Bitcoin amounts to a trade and a liability to income tax.
HMRC has been largely quiet about cryptocurrencies. The last technical briefing was published back in March 2014 which stated determining whether any profit or gain is chargeable, or any loss is allowable, will be looked at on a case-by-case basis taking into account the specific facts.
Stripe, the US based firm which helps more than 100,000 businesses do financial transactions online, is to scrap support for Bitcoin payments citing rising transaction fees and price volatility as reasons for the exit. It said Bitcoin users now saw the virtual currency as an asset to be traded, rather than something to make payments with.
The Government has raised separate concerns about cryptocurrencies being used to facilitate money laundering and tax evasion.
Last November, the then Economic Secretary to the Treasury, Stephen Barclay, stated:
‘The UK government is currently negotiating amendments to the 4th Anti-Money Laundering Directive that will bring virtual currency platforms and custodian wallet providers into Anti-Money Laundering and Counter-Terrorist Financing regulation, which will result in these firms’ activities being overseen by national competent authorities for these areas. The government supports the intention behind these amendments. We expect these negotiations to conclude at EU level in late 2017/early 2018.’
Author: Guy Smith, Head of Technical Research