For a long time, one of the most complex aspects of making use of cryptocurrency was the issue of taxation. In the initial stages of crypto‘s existence, there was no definite tax code in many countries and as such, many crypto users could not or simply did not pay any tax on their cryptocurrency. As crypto grew more prominent within the world, more and more countries began releasing tax codes with regards to cryptocurrency usage and while someone had their flaws, it did signify that cryptocurrency was here to stay.
On November 1, 2019, Her Majesty’s Revenue and Customs, which is the official tax authority within the United Kingdom, updated their guidelines on cryptocurrency tax with regards to both individuals and business entities.
The new addition to the tax guidelines addresses the authority’s view on cryptocurrency as well as how to file for cryptocurrency taxes and best practices. Interestingly enough, exchange tokens were also mentioned within the new version and it was stated that guidelines on utility and security tokens will be added at some point in the future. This is rather significant as in the United States, there have been several cases regarding the securities and exchange commission and private firms in which it was argued that a utility token had been miscategorized as a securities token as in the case of Kik and Telegram.
In terms of business entities, any company that buys or sells on mines tokens or exchanges them for goods and services or provides goods and services in exchange for tokens are liable to pay several types of tax which include income tax, corporation tax, capital gains tax, stamp taxes and National Insurance contributions.
Cryptocurrency, according to the new draft of guidelines, is not considered by the agency to be a form of currency just yet. It was stated, however, that the crypto industry is a fast-growing one and buy the authority intends to look into each aspect of the industry separately and draft laws based on current events rather than theory. This also harkens back to a commonly used talking point which is that many bodies tend to create lots of cryptocurrency and blockchain laws which end up being ineffective because they are based on theories and do not take into account several factors that occur within the industry. One of this is the Swedish tax code which led to an individual being taxed three times what he had made in cryptocurrency trading.