UK’s HMRC says Cryptocurrencies Not Exempt from Digital Services Tax
HM Revenue and Customs (HMRC) says cryptocurrencies do not qualify as money or commodities and are not exempt from the digital services tax.
The tax office has also informed online crypto exchanges that they are subject to the tax, according to a report from The Telegraph, which says it is designed to ensure tech firms like Amazon and Google pay more to the Exchequer. Both of these tech giants have passed the cost of the digital services tax to merchants and advertisers, respectively.
Crypto exchanges have been roped into the Treasury’s tech tax after HMRC said they would not qualify for an exemption granted to financial services companies.
The agency said crypto assets are “not financial instruments” and do not qualify as commodities or money. As such, crypto exchanges that sell crypto are not able to claim an exemption for financial marketplaces.
Last year, the digital services tax came into force and placed a 2% sales tax on online marketplaces, social media, and search engines services that have a global revenue of over £500 million and UK sales of over £25 million.
In its update to the guidance on the digital services tax, HMRC said, “There are a wide variety of crypto assets, each with different characteristics.”
And because crypto does not represent commodities, money, or financial contracts, “it is unlikely that crypto-asset exchanges can benefit from the exemption for online financial marketplaces.”
While expected to be phased out earlier this year, the tax continues to be in force until its replacement comes into effect.
CryptoUK, the country's cryptocurrency industry body, is lobbying the Treasury and HMRC over the issue, saying it is unfair to treat crypto differently from other financial assets.
Ian Taylor, a director of CryptoUK, called the move a new blow to crypto exchanges after the “arduous” licensing regime introduced by the Financial Conduct Authority (FCA) and said it would lead to higher fees for people buying and selling crypto assets.