Everything you need to know about Cryptocurrency Tax in the UK

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Along with corporate and income tax service providers, contemporary accounting needs cryptocurrency tax assistance as well.

There are probable chances that new investors might find Cryptocurrency as an unfamiliar area of investment. Originally, the concept of Cryptocurrency was introduced in 1983, but it is only recently that it has hit the mainstream market.

As an investor, the first thing to notice is the probability of substantial gains from it. So, if you have been struggling with Cryptocurrency accounting, this blog shall pave the way for the starter knowledge of crypto you need.

We have elaborated all necessary information about cryptocurrency tax in the UK in this blog.

Updates and Guidance on Cryptocurrency (UK)

The accounting and tax services reference for Cryptocurrencies isn’t specifically related to IFRS (International Financial Reporting Standards) or UK GAAP (Generally Accepted Accounting Practise) as of the current timings.

In 2018, the ICAEW (Institute of Chartered Accountants in England and Wales) published a technical note on the matter of Cryptocurrency, suggesting potential accounting treatments of it under FRS 102. This forms the principal accounting standard in the reporting regime of UK finances.

According to the possible outlook of ICAEW, Cryptocurrency cannot sum up as cash. There are two main reasons for the inconsideration of crypto as cash: Crypto is not a legal tender like cash; Crypto is subjected to a significant risk of change in value. Both these reasons are completely contrary to the definition of cash under FRS 102.

Further, Cryptocurrency cannot be treated as a financial instrument as it isn’t cash or any other equity statement ensuring the null financial asset of any entity.

Cryptocurrency might be treated as inventories if purchased and sold as a part of the firm’s ordinary course of business. They will be subjected to impairment and valued at a lower cost or net realizable value.

Cryptocurrency tax in the UK

There is no specific Cyrptocurrecy tax legislation as of current accounting treatment. The HMRC issued the internal guidance in December 2019, but the guidelines come without any actual legislation underpinning it.

The Financial Conduct Authority and the Bank of England have denied cryptocurrencies as currency in a joint report. The ICAEW and HMRC regard cryptocurrencies as intangible assets.

According to HMRC, the treatment of Cryptocurrecincies will differ on the basis of trading or non-trading activities as per the UK tax laws.

A similar approach to that of shares and securities trading has been suggested for cryptocurrencies as well.

According to HMRC, Cryptocurrency tax might rarely meet the criteria of businesses, but it can be applied occasionally.

For instance, Cryptocurrency generated through mining activities can be considered as a trading activity for tax purposes, but one is supposed to seek advice from HMRC for all specific situations.

Cryptocurrency tax is still rising in the UK. All the guidances will evolve, which is on the initial stage for the timing.

If you are holding cryptocurrencies, make a point to always work under tax accounting service provider experts who are regularly formulated with the rules, regulations, and latest crypto updates in the UK.

We at FinBridge have an expert team that handles the finance of small and rising businesses so that they don’t need acrobat with things that have no major contribution to productivity. Our team consists of experts and professionals who have sound and profound knowledge of finance. We make sure that our service brings prosperity and growth along with the satisfaction of accuracy.