With the fork in the Bitcoin chain today, there is likely to be some big winners and losers on the crypto currency markets over the next few days.
We’ve had a number of clients and their accountants contact us unsure of their tax position with this (relatively) new and usual technology transaction questioning whether this is a hobby, trading income, capital gains or simply gambling and the answer, quite simply, is it depends.
HMRC have offered some ‘guidance’ on the subject by frankly I don’t feel that it goes nearly far enough to give individuals any clarity on the position, except with regards to VAT. There is no VAT on crypto currencies, but VAT is still charged and payable (in Sterling!) where goods and services are payable in Bitcoins or other crypto currencies.
Unfortunately there is no simple answer to how your activities will be taxed and circumstances must be considered on an individual basis. Historically the tests for whether you are trading have been set very high, but it will depend on your level of activity, commerciality, profitability and the overall setup you have in place.
If you are interested or dealing in Bitcoins get in touch and we can help you through the taxation consequences, we can also provide opinions to guide your accountant to ensure there are no nasty surprises.
Whether Bitcoins will go up and down is anyone’s guess, how much tax you’ll pay shouldn’t be!