Numerous countries have a hard time pinpointing how they want to manage their relationship with Bitcoin – usually, it boils down to three choices: ban, regulate, or ignore.
Her Majesty’s Revenue & Customs (HMRC) is
In the UK, cryptocurrency investors have glided past taxation for years by classifying their Bitcoin transactions, trading, and investments as gambling. However, HMRC’s new policy states these crypto transactions are chargeable assets and subject to capital gains tax.
HMRC’s policy states “In the vast majority of cases, individuals hold crypto-assets as a personal investment, usually for capital appreciation in its value or to make particular purchases. They will be liable to pay capital gains tax when they dispose of their crypto-assets”.
Cryptocurrency investments were once (and agreeably still are) of such a highly speculative nature that the HMRC did not consider them taxable. However, with the Bitcoin price peak in 2017 and cryptos looking like they were headed mainstream, HMRC decided to clarify the issue. Through the issuance of this new policy, HMRC will effectively capture millions in tax revenue.
Despite the soaring price of Bitcoin to nearly $20,000 per coin in 2017, 2018 has seen a harsh decline in Bitcoin’s price per coin. Many have accredited this decline to the Bitcoin Bubble Burst as Bitcoin currently sits under $4,000 per coin. This price volatility has rubbed some investors the wrong way while encouraging regulators to implement strict guidelines regarding cryptos like BTC.
HRMC has also stated that their new policy is not a finished document with a more official policy to be established concerning cryptocurrency held by individuals. Which is confirmed with their statement, “The tax treatment of crypto-assets continues to develop due to the evolving nature of the underlying technology and the areas in which crypto-assets are used. 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”.
Despite the new taxation policy, the UK has inadvertently recognized cryptocurrency like Bitcoin as a form of legitimate money, or at least a “digital storage of value” through this policy. However, the 4,400-word (and counting) document is not the first European cryptocurrency guideline created, as Switzerland’s FINMA did so nearly a year ago