Blockchain Assets & Implications
In the UK, the trade of cryptocurrency and NFTs (non fungible tokens) is subject to tax, governed by Her Majesty’s Revenue and Customs (HMRC). As blockchain assets are considered a form of property, the buying and selling of crypto and NFTs is subject to capital gains tax, in the event that a profit has been made as a result of their value increasing since they were acquired.
Mining or earning cryptocurrency via another means is often considered a form of income and should be declared as such. As with any earnings minus your tax free allowance, this is subject to income tax.
Cryptocurrency & NFT Case Studies
Case Study 1:
Our team assisted an individual with a diverse cryptocurrency portfolio that spanned various online exchanges. They had disposed of some crypto assets, cashing out into standard currency, while others were converted into different cryptocurrencies, and some were simply held. We provided consultancy on the tax treatment of holding versus disposing of the investments, confirmed the pooling requirements for each coin held, calculated the capital gains tax, and assisted with declaring it to HMRC.
Case Study 2:
A client had become interested in cryptocurrency and started investing as a supplementary income alongside their full-time job. They were uncertain whether the money made from trading should be considered income or capital. We conducted a comprehensive analysis, cross-checked the badges of trade with the individual's circumstances, and determined whether to declare income or capital gains tax.
Case Study 3:
Our team worked with a corporate entity (PLC) that had various contracts and sponsorships with large cryptocurrency clients and well-known coins. Some sponsorship contracts were paid in blockchain assets that had been converted into others. We calculated the tax liability based on the cryptocurrency payments the client received and assisted in declaring the correct level of corporation tax for each invoice settled in crypto.