Those looking for some good news amid the upheaval in the crypto-world will be delighted to know that if they’re in the U.K., they won’t need to worry about paying taxes on Bitcoin.
Her Majesty’s Revenue and Customs (HMRC), the tax authority in the U.K., has announced that both the 20% value added tax (VAT) on trades as well as tax on gains will be scrapped, as reported by the Financial Times. Quite understandably, entrepreneurs in bitcoin businesses had long complained that the VAT made it virtually impossible for them to compete globally.
As governments around the world have refused to consider Bitcoin a currency, the ruling, at least for tax purposes, is doing just that: it is based on the EU law exempting payments and transfers of “negotiable instruments” from sales tax.
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The concrete stance differs markedly from that of the US, which still has yet to offer taxpayers guidance on how virtual currencies shall be treated. The uncertainty leaves in doubt how capital gains, losses (perhaps even those from MtGox) and mining profit should be treated.
The U.K.’s favorable stance toward cryptocurrency seems to be attracting more business activity. Bitcoin Foundation reportedly informed the Financial Times that it plans on moving its head offices from the U.S. to the U.K. this spring.
The tax authority has stated:
“HMRC has been working closely with the Bitcoin industry on the tax treatment of trading in Bitcoins and commission. We will be issuing guidance shortly.”