- Allens Accounts
BITCOIN: A TAX CHALLENGE
Updated: Feb 7, 2020
Are you sick of reading about Bitcoin and its meteoric rise? Irritating as it can be, the figures are currently undeniable - is currently standing at $18,000, having been $630 when HMRC published its bulletin on cryptocurrencies back in March 2014.
The tax rules are certainly up for debate. HMRC’s analysis that cryptocurrency activity may be so speculative that it can be treated as gambling and therefore not subject to tax at all is encouraging for those who have chosen this investment path.
However, this was probably largely due to the fact that HMRC were more concerned about discouraging large loss claims in respect of Bitcoin investments gone wrong and their ‘gambling view’ not only
exempts profits but also prevents loss claims. Also, it isn’t clear that Bitcoin does meet the gambling definition which is required in section 51 TCGA 1991 to enjoy a capital gains tax exemption.
Although the gambling argument may not stack up technically the content of the HMRC’s guidance may give investors a nil tax filing position. What is however abundantly clear is that investors will be keen for any profit which IS taxable to be subject to favorable capital gains tax rates of up to 20% rather than income tax rates of up to 45%.