The tax collection service of United Kingdom has published detailed legislation for private cryptocurrency holders on 19th December this year.
The investors who have invested in the digital currency market are like to face a hefty bill. Investing in the crypto market can give you a quick route to make money. But HRMC has made it clear that such gains also falls under the tax laws. Due to the recent volatility of the market many investors are not aware of the tax.
Till date, there was an absence of clearness about the taxes on day trading, CFDs, Bitcoins, futures, stocks, and Forex, as for how tax gets applied to the profit and loss. But with the recent advancement, any person involved in cryptocurrency transaction will be accountable to pay CGT, Income Tax or Corporation Tax. The charges on the profit or gain and losses will be decided after studying cases and taking specific facts into account.
HRMC has made it clear that asset taken for investment will be considered under CGT ( Capital Gain Tax), although each case will be considered on their grounds. Bitcoin and other virtual currencies are considered as an asset and investment of them will fall under CGT.
Further, they have made it clear that traders, who are trading Bitcoin and other digital currencies will fall under Income Tax, while non-traders will be liable to CGT. If you are not clear about which category your trade falls into, you can refer to HRMC ’s business income manual.
Although HRMC is aware of the fact that certain complex areas need crucial guidance, record keeping may be an issue for the person who has many transactions. Individuals need to keep data of every transaction to calculate their tax.
The position of ICO remains indistinct, as there can be many investors who are keen on investing in tokens that cannot be considered as coins. In such cases determining correct tax treatment for the individual remains an issue.
EU is planning for increased regulations on trading platforms and wallet providers to conduct identity checks for those transactions. The relationship between tax authorities and investors may change over the next few years whereas the approach of HRMC towards cryptocurrency remains up front.
Carefully consider your tax activities, an inability to meet your tax responsibilities in the UK can land you in serious trouble and even prison. So to be safe to take your taxes seriously.