BTCGBP Bitcoin

Bitcoin Global News (BGN)

December 20, 2018 -- ADVFN Crypto NewsWire -- The tax agency of the United Kingdom has released a more detailed report on how to properly report cryptocurrency related taxes for individuals. They paper acknowledges the gray areas, and the rapidly changing industry, along with culture that surrounds it. Overall there is optimism and a clear acceptance for the new financial tool, but caution is taken and explain to ensure that over time the integration can happen smoothly.

The Majesty’s Revenue and Customs (HMRC) is responsible for collecting taxes and overseeing related activities in the UK. They define cryptocurrencies as: Cryptoassets (or ‘cryptocurrency’ as they are also known) are cryptographically secured digital representations of value or contractual rights that can be:

• transferred

• stored

• traded electronically

They state three broad categories that most cryptocurrency can fit into, as exchange tokens utility tokens or security tokens.

• Exchange tokens are intended to be used as a method of payment and encompasses ‘cryptocurrencies’ like bitcoin. They utilise DLT and typically there is no person, group or asset underpinning these, instead the value exists based on its use as a means of exchange or investment. Unlike utility or security tokens, they do not provide any rights or access to goods or services.

• Utility tokens provide the holder with access to particular goods or services on a platform usually using DLT. A business or group of businesses will normally issue the tokens and commit to accepting the tokens as payment for the particular goods or services in question.

• Security tokens may provide the holder with particular interests in a business, for example in the nature of debt due by the business or a share of profits in the business.

Although any of these can be transferred as payment for goods in exactly the same way that fiat currency is, they explicitly do not consider cryptocurrencies money for the purpose of the tac guidelines. This has strong implications for business, but these updates are made specifically for guiding individual cryptocurrency holders.

Where individuals are paid in cryptocurrency, it is to be recorded as a non-cash payment and taxed accordingly. The other primary situation where taxes apply are from mining, airdrops or capital gains. Increases in value of any token is to be treated like that of shares, securities and other financial products. However, mining poses some of the biggest questions for taxes moving forward. Ultimately the process could be completely undertaken by machines, and the deposits can be transferred to anonymous wallets, or ones not associated with a single individual.

By: BGN Editorial Staff