Bitcoin will not be subject to VAT, says HM Revenue and Customs - PC Retail

Bitcoin will not be subject to VAT, says HM Revenue and Customs

Decision means Bitcoin is to be treated as a currency, rather than goods
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Bitcoin and other cryptocurrencies will not be subject to VAT, HM Revenue and Customs has decided.

In a brief outlining the tax treatment of cryptocurrencies, HMRC states that “as an EU tax, the VAT treatment for cryptocurrencies adopted by the UK must be consistent with any treatment that may eventually be implemented across the EU”.

The decisions made regarding virtual currencies, including spin-off currencies Dogecoin and Litecoin, were as follows:

Income received from Bitcoin mining activities will generally be outside the scope of VAT on the basis that the activity does not constitute an economic activity for VAT purposes because there is an insufficient link between any services provided and any consideration received.

Income received by cryptocurrency miners for other activities, such as for the provision of services in connection with the verification of specific transactions for which specific charges are made, will be exempt from VAT.

When Bitcoin is exchanged for Sterling or for foreign currencies, such as Euros or Dollars, no VAT will be due on the value of the Bitcoins themselves.

Charges (in whatever form) made over and above the value of the Bitcoin for arranging or carrying out any transactions in Bitcoin will be exempt from VAT.

“However,” the brief states, “in all instances, VAT will be due in the normal way from suppliers of any goods or services sold in exchange for Bitcoin or other similar cryptocurrency.”

“The value of the supply of goods or services on which VAT is due will be the sterling value of the cryptocurrency at the point the transaction takes place.”

The decision could be seen as a step forwards in legitimacy for Bitcoin and its derivatives, paving the way for more retailers to possibly consider accepting the digital money.

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