UK Tax Authority, HM Revenue and Customs (HMRC), Updates Guidance on Crypto Taxation
Meanwhile, Britain's financial services minister said the focus is on regulating stablecoins, and intervention in the wider crypto markets is “less immediately pressing.”
HM Revenue and Customs (HMRC), UK tax authority, published fresh guidance on the taxations of crypto assets, an update to late 2019 issued guidance that aims to provide clarity on the taxation of cryptocurrency assets.
the update involves the trading of tokens, conversion to fiat currency, mining transactions, and staking for both individuals and corporations.
According to the guidance, If a company or business is carrying out activities that involve tokens, they are liable to pay tax on them whether buying and selling them, exchanging them for other assets, mining, or providing goods or services in return for tokens.
When it comes to mining transactions, it will be a taxable trade based on a range of factors such as degree of activity, organization, risk, and commerciality.
“Staking” has been addressed as a type of mining “which weights the entitlement to newly forged tokens.” Yet again, the taxability of them depends on several factors like mining.
The guidance says, if the mining activity of the business does not amount to a trade, the pound sterling value of any crypto assets awarded for successful mining will be taxable as miscellaneous income subtracting the expenses.
Profits will be “calculated according to the relevant tax rules” if the activity does amount to a trade.
When it comes to individuals, HMRC says that “only in exceptional circumstances” would it expect “individuals to buy and sell exchange tokens with such frequency, level of organization and sophistication that the activity amounts to a financial trade in itself.”
If the miner, either business or individual, keeps the awarded assets, they may have to pay Capital Gains Tax when they dispose of them later.
Not the Pressing Concern
On Tuesday, Britain's financial services minister said they would first focus on regulating stablecoins than the broader crypto market.
“We need to manage risks to competition,” John Glen told a City & Financial conference.
“There is the potential for some firms to swiftly achieve dominance and crowd out other players, due to their ability to scale and plug into existing online services.”
According to him, the case for intervention in the wider crypto markets is “less immediately pressing” while saying it is a “once-in-a-generation opportunity” to make “vast strides in the efficiency of financial services.”
Separately, Britain’s financial watchdog said imposing existing electronic money rules that authorize cashless payments on stablecoins won’t be suitable.
“The e-money regime isn’t a perfect match for crypto,” said Alex Roy, head of consumer distribution policy at the Financial Conduct Authority, at the same conference.
In other news, this week, the Iowa House of Representatives also passed a bill to legally recognize smart contracts. Democratic Representative Steve Hansen suggested the bill's implementation would lead to broader regulation of crypto.