Bitcoin has been a serious topic of conversation in most circles lately. With increasing values, it has been in the news a lot. How does Bitcoin affect a country’s tax system? here is what you can learn about Bitcoin and the UK Tax System.
Bitcoin investors have been requested to account for any gains or losses they have made in trading, on their self-assessment tax returns. There are two lines of thought when it comes to taxing on Bitcoin trades. Some believe that profits made on Bitcoin transactions are not taxable as it’s similar to gambling involving a speculative element. Some, especially tax advisors, believe that since Bitcoin is now traded frequently, it’s a trade and is therefore liable for income tax.
Understanding Tax and Bitcoin
When understanding the position of the UK tax system on Bitcoin, one thing we know is that Her Majesty’s Revenue and Customs (HMRC) has been more or less quiet about cryptocurrencies in general, Bitcoin included. The HMRC had stated in its last technical briefing published in March 2014 that cryptocurrencies would be considered on a case-by-case basis to determine whether any profit or gain is chargeable or any loss allowable for UK tax returns.
Some companies have withheld their support for Bitcoin transactions of late due to increasing transaction fees, volatility in prices and due to the fact that more Bitcoin users are now considering the virtual currency as an asset which could be traded rather than as a means to make payments. Concerns have also arisen, especially among sections of the Government, that it’s being used to evade taxes and for illegal activities such as money laundering. In fact, measures are currently being considered to tighten regulations in these areas.