UK Regulator Issues Crypto Tax Guidance For Businesses

The major tax agency in the United Kingdom, HMRC, has finally issued the cryptocurrency tax guidance for businesses, following its year-old promise. The UK regulator Her Majesty’s Revenue & Customs (HMRC) was in the cryptocurrency news last year when it clarified the situation for individual taxpayers, showing what separates utility tokens from security tokens.

It now provided tax details about businesses and enterprises and crypto asset exchange tokens. The guidance for the utility and security tokens is still expected to be released soon, the regulator said.

However, under the latest guidance, crypto assets continue to be defined as commodities and not money or currency. The UK regulator also went with details on token trading, stating that corporations engaged in trading exchange tokens (selling goods or services for crypto or mining) are liable for tax payments. They will pay a capital gains tax, corporation tax, income tax, national insurance contributions, stamp taxes and VAT – which are at the discrimination of the authority for each specific case.

HMRC said that most of the mining activities constitute a taxable event as a form of trading. If the mined coins are not traded, they are under the “miscellaneous” category with income which carries its own tax burden.

“Using a home computer while it has spare capacity to mine tokens would not normally amount to a trade … to mine tokens for an expected net profit would probably constitute trading activity,” the UK regulator said.

Besides at-home mining which is not a taxable event, HMRC pointed to investments and wages which fall in the category that holds both a capital gains tax and corporation tax. As with crypto asset guidance for individuals, exchange tokens can be pooled for ease of circulation.

“If a person owns bitcoin, ether and litecoin, they would have three pools and each one would have its own ‘pooled allowable cost’ associated with it. This pooled allowable cost changes as more tokens of that particular type are acquired and disposed of,” the UK regulator stressed.

There is additional guidance for hard forks and airdrops provided, even though there is no apparent change from the individual guidance which was issued back in 2018. On top of this, employees can be paid in crypto assets (under the new laws) regardless of authorities and their non-recognition of crypto assets as money.

“HMRC’s views may evolve further as the sector develops,” the guidance concludes.