For a number of years, HM Revenue &Customs (HMRC) has been quite vague about the tax treatment of trading in crypto currency (e.g. Bitcoin) and other crypto assets. The Revenue has now published policy papers https://www.gov.uk/government/collections/cryptoassets removing any doubt.
Previous guidance has raised the possibility that, due to the volatility in the value of crypto assets, any gains made could be treated as proceeds from gambling which are exempt from tax. HMRC has now confirmed that crypto assets are chargeable assets for the purposes of Capital Gains Tax. This means that individuals are liable to Capital Gains Tax on any gains above their Annual Exemption, and companies are liable to Corporate Tax.
The other side of the coin should also be considered in that any losses incurred would be allowable to offset against gains arising on other chargeable assets. This is not possible for losses on exempt assets.
Those individually or in partnership trading in crypto assets as a business, however, are liable to income tax on the profits made.
Beavis Morgan is now starting to receive more queries relating to crypto assets and we are readily available to advise those who are unsure of their tax position. Contact your usual Beavis Morgan Partner for more information.