ATT Technical Officer The Association of Taxation Technicians
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More blocks in HMRC’s cryptoasset guidance chain


HMRC has published another block of guidance which focuses on the position for businesses that transact in cryptoassets, but this won’t be the last link in the guidance chain.

8th Nov 2019
ATT Technical Officer The Association of Taxation Technicians
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HMRC’s guidance on cryptoassets has been evolving in recent years. The early guidance from 2014 was brief and it was not until late 2018, following discussions with advisers and professional bodies, that more detailed guidance for individuals emerged.

The latest guidance on tax for businesses builds on both these blocks. There is a substantial amount of overlap with the individuals’ guidance in areas such as whether a business is trading or investing in cryptoassets, and how to calculate chargeable gains and losses. In addition, new elements for businesses include consideration of:  

  • Loan relationship rules
  • Intangible fixed assets regime
  • VAT on transactions and mining
  • Stamp duties
  • Venture capital schemes

Exchange tokens only

The guidance does not cover all forms of cryptoassets (which are many and extremely varied). It examines only the most common form called exchange tokens. These are tokens which are intended to be used as a method of payment, the most common example being Bitcoin.

When determining the nature of a cryptoasset, facts matter more than terminology. HMRC will be looking at what has actually happened to determine what it considers the correct tax treatment to be, not just how the transaction has been labelled.

It’s not money

In line with its previous guidance, HMRC says it does not consider any cryptoassets to be money. This has implications for corporation tax purposes, as any legislation (such as foreign currency rules) which only applies to money, or currency, will not apply to cryptoassets.

On the same basis, the loan relationship rules will not apply in most cases and lending an exchange token will not generally create a loan relationship. However, if exchange loans are provided as collateral security for a loan, then the loan relationship rules will apply.

This contrasts with the original 2014 guidance, which talked about the general rules of foreign exchange and loan relationships applying to virtual currencies such as Bitcoin. finance Directors will need to consider whether the updated HMRC guidance affects the treatment that they have adopted to date for their company.


Here the latest guidance restates and reiterates the views which HMRC expressed in 2014.

Where a business accepts cryptoassets in exchange for goods or services VAT should be charged in the usual way, with VAT calculated on the sterling value of the exchange tokens on transaction. However, no VAT is due on the supply of the token itself.

Income from cryptoasset mining activities or services connected with exchanging cryptocurrencies for legal tender or other cryptoassets is considered to be outside the scope of VAT.

Stamp duties

There has been uncertainty over whether either Stamp Duty (SD) or Stamp Duty Reserve Tax (SDRT) applies to cryptoassets. HMRC has now confirmed that, when exchange tokens are transferred, it doesn’t expect SD or SDRT to apply in most cases. Where exchange tokens are used to pay for stock or securities then, while the tokens don’t qualify as consideration for SD, they are treated as consideration for SDRT, and an SDRT liability will arise on the sterling equivalent.

However, there is a caveat that HMRC will look at this issue on a case-by-case basis, rather than simply assume that any token claiming to be an exchange token is outside the scope of stamp duties.

Venture capital schemes

The underlying technology for cryptoassets has a large number of potential uses and HMRC have received applications from companies developing such uses, that want to benefit from tax-advantaged schemes such as EIS and SEIS.

The new guidance highlights that, provided all the other conditions are met, there is nothing to preclude such companies from applying for these venture capital schemes. Although HMRC does express doubts over whether companies wholly or mainly dealing in, exchanging, or mining tokens would qualify.

Where next?

There are a number of areas where further blocks of guidance would be much appreciated to remove uncertainty. The primary requirement (and where work is in-hand) is in respect of the situs of any cryptoasset, which is a particular issue for non-domiciled individuals.

Initial coin offerings, where entities seek to raise funds by issuing new tokens with a range of possible functions, also create significant technical accounting and corporation tax issues where it would be good to know HMRC’s view.

Is guidance enough?

There is a point at which the cryptoasset community will need more than guidance. These “assets” are unique and the existing tax legislation is simply not designed to take account of this virtual world.

Legislation in some areas – particularly in matters such as situs – has been requested. On the other hand, in a rapidly evolving area, there is a danger that putting legislation in place too soon could bake-in unintended consequences that may take a long time to fix.

From a practical perspective, specific legislation is unlikely to emerge in the short term, and some guidance is certainly better than no guidance. HMRC has worked hard to understand the concerns of those trying to advise in this area and feedback on its guidance is always welcome.  

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