As a completely new asset class, the UK laws governing cryptocurrency taxation have never really been quite clear or transparent. Nonetheless, the past few months, several world governments have revealed their intentions to simplify and streamline the process of paying tax on cryptocurrency transactions including at the G20 summit in Buenos Aires last week.
In the United States, a “House Ways and Means” (as it is called) committee serving the Internal Revenue Service (IRS) has frequently demanded clearer definitions on how transactions in the cryptocurrency world should be taxed. Japanese financial regulators were also quick to introduce a legal framework for cryptocurrency usage which still however is remains somewhat confusing. It is now widely reported across media in Asia that Japan’s National Tax Agency (also known as the NTA) is now seeking other ways to simplify the system in order to attract investors to report their gains and losses and not be deterred by the current complexity of the procedure.
In the UK, the regulations are examined and set by the The Cryptoassets Taskforce — England’s collaborative body focused on investigating cryptocurrency. They have now also joined what is becoming a global urgency and shout for greater clarity and transparency on crypto tax.
The group are an amalgamate of Financial Conduct Authority, Treasury and Bank of England officials and was formed in April 2018, to identify and explore the potential benefits and challenges of cryptocurrencies for the country’s financial sector.
In just July this year, the joint HM Treasury-Financial Conduct Authority-Bank of England Cryptoassets Taskforce produced a report that sets out the UK’s approach to cryptoassets and distributed ledger technology in financial services. It provided an overview of cryptoassets and DLT, assesses the associated risks and potential benefits, and sets out the path forward with respect to regulation in the UK.
Though it is true (and the Taskforce have also accepted this) that tax is outside their remit, and that no “substantive considerations of tax issues” have been made in the report, the group also stated strenuously that:
“HM Treasury is working closely with HM Revenue and Customs (HMRC) to consider the tax issues raised by cryptoassets”. They also added that revised guidance is to be issued by HMRC early next year as noted: “Current guidance on the tax treatment of cryptoassets is set out on HMRC’s website. HMRC will further update their guidance by early 2019, drawing on the Taskforce’s work“.
In the current economic climate, cryptocurrencies fall under the remit of pre-existing tax laws in the UK, and whether they are subject to Income Tax, Corporation Tax or Capital Gains depends on the activities and the parties involved. As governments now have a better comprehension of the crypto market, many claim they are also seeking to increase their revenue from such activities. This being the main driver, it could mean that the coming year could see new tax laws developed to incorporate and adequately cover crypto.
Feel free to download the full report here.
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