LONDON: Bitcoin and cryptocurrency profits might soon get taxed in the UK, several crypto experts have said. Bitcoin, along with other cryptocoins, has staged an impressive rally this year, gaining around 1,900% to peak in mid-December. The UK body responsible for tax collection, Her Majesty’s Revenue and Customs (HCMR), is set to tax Bitcoin profits, according to some crypto analysts. Benjamin Dives, head of the London Block Exchange, told British newspaper Express: “In this world, nothing can be said to be certain, except death and taxes. Cryptocurrency may be new and unique, but it is not exempt from tax liability.”
Dives expects HCMR to impose taxes on those who generate profits from Bitcoin and cryptocurrency investments. It will be similar to the taxes paid by investors who profit from stocks. In the latter case, it is done via the annual self-assessment.
Bitcoin profits may be subject to a Capital Gains Tax of 20% for individuals and a 19% Corporation Tax in the case of companies involved in trading. The good news is that there is a Capital Gains Tax free allowance of 11,300 pounds per year, which means that individuals who generate an annual profit up to that level are exempt from these taxes.
However, Bitcoin might become a tool for tax evasion as it is not linked to any government. “It almost certainly already is, with either large amounts of undeclared gains on the current bubble or money laundering,” said Richard Asquith, Avalar VP of global indirect tax.
Daniele Bianchi, finance assistant professor at Warwick Business School, noted: “Other than the dark web, tax evasion and money laundering are the two main ways one could use Bitcoin to break the law.”
On the other hand, the blockchain system behind Bitcoin allows law authorities to monitor potential crimes. Moreover, once Bitcoin goes mainstream, it will become less attractive for tax evaders.
Dives added that crypto exchanges have to stick to KYC and AML protocols in order to reduce anonymity.
Earlier, the UK Treasury revealed its intention to regulate cryptocurrencies to fight both money laundering and terrorist financing.
