Cryptocurrency holders in the U.K. can now consult with official guidance on what tax they should be paying on their assets.
The United Kingdom tax collection service published its first detailed tax legislation for private cryptocurrency holders Dec. 19 following a lengthy consultation period.
Its new policy paper, “Cryptoassets for Individuals,” sets out likely tax obligations for private investors who buy, sell, get paid in and even lose cryptocurrency.
Capping months of uncertainty among U.K. taxpayers over what they need and need not report to authorities about their holdings, the latest information is officially endorsed by tax collection agency HM Revenue & Customs (HMRC).
Specifically, individuals will be liable to pay either Capital Gains Tax (CGT) or Income Tax (IT) depending on the type of cryptocurrency transactions they are involved in.
In the case of receiving payment from an employer in cryptocurrency, employees would also have to pay social security contributions known as National Insurance (NI).
“The tax treatment of cryptoassets continues to develop due to the evolving nature of the underlying technology and the areas in which cryptoassets are used,” HMRC writes introducing the paper.
“As such, HMRC will look at the facts of each case and apply the relevant tax provisions according to what has actually taken place (rather than by reference to terminology). Our views may evolve further as the sector develops.”
The paper does not give information about businesses’ obligations, which authorities say will appear later.
Among the notable features of the HMRC’s position are tax liability in the case of loss or theft of cryptocurrency, for example through hacking of a wallet.
In such cases, the victim “still owns the assets and has a right to recover them,” it says, meaning CGT obligations remain until it becomes apparent they are forever inaccessible.
“Those who do not receive cryptoassets they pay for may not be able to claim a capital loss,” the paper adds.
“Those who pay for and receive cryptoassets, may be able to make a negligible value claim to HMRC if they turn out to be worthless.”
The U.K. had come under fire in the preceding months over various plans for cryptocurrency regulation which may see a ban on certain types of associated instruments such as Bitcoin futures.
A recent survey revealed high rates of ownership and interest in cryptocurrency, along with a strong belief in its future growth prospects.
Source: Cointelegraph https://cointelegraph.com/