A detailed explanation is released by the United Kingdom Tax Agency regarding the cryptocurrency assets and taxes to be imposed by the tax agency on the holdings of individuals.
As per the report released by the Her Majesty’s Revenue and Customs (HMRC) – a government agency focused on the collection of tax and oversees other components of the government, the primary focus of United Kingdom Tax Agency is on how the crypto users will be taxed. However, the reports didn’t specify the tokens’ scheme for taxation which is held for business purposes. The report released was somewhere on the same track like previous reports – which were focused more on treating the virtual assets like property, rather than considering it as a form of money.
The document reads as:
“HMRC does not consider crypto assets to be currency or money. This reflects the position previously set out by the report from the Crypto asset Taskforce (CATF)”
The reports released on Wednesday further states about the procedure to be followed to treat token for taxation; depending upon the use case of token, rather than following its definition.
The Her Majesty’s Revenue and Customs said:
“Taxation of exchange tokens like BTCs is more focused in this document. It does not specifically consider utility or security tokens. For utility and security tokens, the new tax treatment is needed; however, this advice provides just our starting principles.”
Investors, who thought about the increase in value, will have to pay tax on capital gain. Apart from this, the individuals who received tokens as a mode of payment from mining, payment fees, or airdrops will have to pay income tax accordingly.
Added to this, the reports say:
“There may be some cases where the individuals are running a startup; running on financial trade in virtual assets, therefore, they will have trading gains on taxation. However, it is rare, but, in some cases, Income Tax would be preferred more over the Capital Gains Tax rules. Separate information regarding business in due course will be published later by the HMRC.”
The HMRC further quoted that the users will have to claim that the virtual assets owned by them have no value, this way, after the approval, they can claim their loss easily.