Crypto Currency Thread
Discussion
I didn’t find that bit especially interesting as we already knew that.
I found the line:
“HMRC does not consider the buying and selling of cryptoassets to be the same as gambling”
...to be of more interest as it puts paid to the oft-cited advice to claim profits as gambling wins which means no tax due. I wonder what effect this will have on the shady side of the industry - the former spreadbetters and binary options types - who offer easy routes to ‘trading’.
Also the developing advice on mining and trading seems to be ‘we tax you when you convert to sterling’ which is what I expected. All the noise online claiming you will be taxed on unrealised gains if you convert into other crypto or hold into a new tax year are obviously wrong. You pay only when you dispose of the asset and convert to sterling.
Also useful for those of us who use bitcoin is the definition of ‘money’s worth’ which can be applied to both earnings and spending.
Overall a good document and a reasonable effort from HMRC but of course there are an almost unlimited number of ways to circumvent this if you were so inclined and as people move away from converting to fiat as an end goal the game will completely change.
I found the line:
“HMRC does not consider the buying and selling of cryptoassets to be the same as gambling”
...to be of more interest as it puts paid to the oft-cited advice to claim profits as gambling wins which means no tax due. I wonder what effect this will have on the shady side of the industry - the former spreadbetters and binary options types - who offer easy routes to ‘trading’.
Also the developing advice on mining and trading seems to be ‘we tax you when you convert to sterling’ which is what I expected. All the noise online claiming you will be taxed on unrealised gains if you convert into other crypto or hold into a new tax year are obviously wrong. You pay only when you dispose of the asset and convert to sterling.
Also useful for those of us who use bitcoin is the definition of ‘money’s worth’ which can be applied to both earnings and spending.
Overall a good document and a reasonable effort from HMRC but of course there are an almost unlimited number of ways to circumvent this if you were so inclined and as people move away from converting to fiat as an end goal the game will completely change.
coyft said:
It seems very straightforward.
Think of it as buying, selling or swapping shares, the same CGT rules.
Or if you are paid in crypto then income tax rules apply.
No it isn't the same as how I buy and sell shares. It's more like a stock swap. Also there is no physical location of the asset so it's like being able to exhcnage shares across all stock markets, without using any fiat.Think of it as buying, selling or swapping shares, the same CGT rules.
Or if you are paid in crypto then income tax rules apply.
coyft said:
None of that makes it anymore complicated. You pay CGT on the gain, the gain is easy enough to work out. Where an asset is located makes no difference in working out what the gain or loss is.
You're over complicating it.
The point he's making is that buying one coin with another is treated as selling one for fiat and using that to buy the other. Therefore you crystallise your gain on the first coin even if you lose all your money by the second coin going down.You're over complicating it.
This is why there are people out there with big tax bills but no profits to pay them with, especially as many made gains in FY17 and losses in FY18 so were not able to offset.
dimots said:
I didn’t find that bit especially interesting as we already knew that.
I found the line:
“HMRC does not consider the buying and selling of cryptoassets to be the same as gambling”
...to be of more interest as it puts paid to the oft-cited advice to claim profits as gambling wins which means no tax due. I wonder what effect this will have on the shady side of the industry - the former spreadbetters and binary options types - who offer easy routes to ‘trading’.
Also the developing advice on mining and trading seems to be ‘we tax you when you convert to sterling’ which is what I expected. All the noise online claiming you will be taxed on unrealised gains if you convert into other crypto or hold into a new tax year are obviously wrong. You pay only when you dispose of the asset and convert to sterling.
Also useful for those of us who use bitcoin is the definition of ‘money’s worth’ which can be applied to both earnings and spending.
Overall a good document and a reasonable effort from HMRC but of course there are an almost unlimited number of ways to circumvent this if you were so inclined and as people move away from converting to fiat as an end goal the game will completely change.
Spread bets and other OTCs do not come under the Gaming Act but The FCA. Despite this there is a tax collected at source on spreadbets as per ‘bets’. I found the line:
“HMRC does not consider the buying and selling of cryptoassets to be the same as gambling”
...to be of more interest as it puts paid to the oft-cited advice to claim profits as gambling wins which means no tax due. I wonder what effect this will have on the shady side of the industry - the former spreadbetters and binary options types - who offer easy routes to ‘trading’.
Also the developing advice on mining and trading seems to be ‘we tax you when you convert to sterling’ which is what I expected. All the noise online claiming you will be taxed on unrealised gains if you convert into other crypto or hold into a new tax year are obviously wrong. You pay only when you dispose of the asset and convert to sterling.
Also useful for those of us who use bitcoin is the definition of ‘money’s worth’ which can be applied to both earnings and spending.
Overall a good document and a reasonable effort from HMRC but of course there are an almost unlimited number of ways to circumvent this if you were so inclined and as people move away from converting to fiat as an end goal the game will completely change.
There is zero impact on the OTC market as cryptos are the exact same as any other market traded. So your gains via spread bet positions are tax free and you cannot offset your losses. And the same ‘professional trader’ rules apply re income tax.
And switching from one crypto to another is seen as a disposal and taxed accordingly. Ie when you convert to another crypto it is a crystallisation of the position for tax purposes.
What constitutes a ‘disposal’
Individuals need to calculate their gain or loss when they dispose of their cryptoassets to find out whether they need to pay Capital Gains Tax. A ‘disposal’ is a broad concept and includes:
selling cryptoassets for money
exchanging cryptoassets for a different type of cryptoasset
using cryptoassets to pay for goods or services
giving away cryptoassets to another person
NickCQ said:
The point he's making is that buying one coin with another is treated as selling one for fiat and using that to buy the other. Therefore you crystallise your gain on the first coin even if you lose all your money by the second coin going down.
This is why there are people out there with big tax bills but no profits to pay them with, especially as many made gains in FY17 and losses in FY18 so were not able to offset.
They can crystallise their losses in the same tax year and either pay CGT in any gain above their annual allowance or report any loss and carry it forward to use. This is why there are people out there with big tax bills but no profits to pay them with, especially as many made gains in FY17 and losses in FY18 so were not able to offset.
DonkeyApple said:
They can crystallise their losses in the same tax year and either pay CGT in any gain above their annual allowance or report any loss and carry it forward to use.
Sure, but the FY17/18 crossover caught a lot of people, and these people are unlikely to generate future capital gains to make use of those loss carry forwards.coyft said:
But the treatment is no different to swapping any asset as far as CGT is concerned. Crypto isn't treated any differently.
Ok CGT is on gains. I get that you crystallise the gain when you exchange btc for eth, ok...so CGT due. That's fine. That's actually how I have been paying it anyway...no change here.For my own position the only one that 'matters' is bch to btc. I gained a load of bch which I exchanged for btc. Would that be tax neutral?
dimots said:
For my own position the only one that 'matters' is bch to btc. I gained a load of bch which I exchanged for btc. Would that be tax neutral?
I suggest you might want to read the guidance for forks:HMRC said:
Blockchain forks
Some cryptoassets are not controlled by a central body or person, but operate by consensus amongst that cryptoasset’s community. When a significant minority of the community want to do something different they may create a ‘fork’ in the blockchain.
There are two types of forks, a soft fork and a hard fork. A soft fork updates the protocol and is intended to be adopted by all. No new tokens, or blockchain, are expected to be created. A hard fork is different and can result in new tokens coming into existence. Before the fork occurs there is a single blockchain. Usually, at the point of the hard fork a second branch (and therefore a new cryptoasset) is created.
The blockchain for the original and the new cryptoassets have a shared history up to the fork. If an individual held tokens of the cryptoasset on the original blockchain they will, usually, hold an equal numbers of tokens on both blockchains after the fork.
The value of the new cryptoassets is derived from the original cryptoassets already held by the individual. This means that section 43 Taxation of Capital Gains Act 1992 will apply.
After the fork the new cryptoassets need to go into their own pool. Any allowable costs for pooling of the original cryptoassets are split between the pool for the:
original cryptoassets
new cryptoassets
If an individual holds cryptoassets through an exchange, the exchange will make a choice whether to recognise the new cryptoassets created by the fork.
New cryptoassets can only be disposed of if the exchange recognises the new cryptoassets. If the exchange does not recognise the new cryptoasset it does not change the position for the blockchain, which will show an individual as owning units of the new cryptoasset. HMRC will consider cases of difficulty as they arise.
Costs must be split on a just and reasonable basis under section 52(4) Taxation of Capital Gains Act 1992. HMRC does not prescribe any particular apportionment method. HMRC has the power to enquire into an apportionment method that it believes is not just and reasonable.
Some cryptoassets are not controlled by a central body or person, but operate by consensus amongst that cryptoasset’s community. When a significant minority of the community want to do something different they may create a ‘fork’ in the blockchain.
There are two types of forks, a soft fork and a hard fork. A soft fork updates the protocol and is intended to be adopted by all. No new tokens, or blockchain, are expected to be created. A hard fork is different and can result in new tokens coming into existence. Before the fork occurs there is a single blockchain. Usually, at the point of the hard fork a second branch (and therefore a new cryptoasset) is created.
The blockchain for the original and the new cryptoassets have a shared history up to the fork. If an individual held tokens of the cryptoasset on the original blockchain they will, usually, hold an equal numbers of tokens on both blockchains after the fork.
The value of the new cryptoassets is derived from the original cryptoassets already held by the individual. This means that section 43 Taxation of Capital Gains Act 1992 will apply.
After the fork the new cryptoassets need to go into their own pool. Any allowable costs for pooling of the original cryptoassets are split between the pool for the:
original cryptoassets
new cryptoassets
If an individual holds cryptoassets through an exchange, the exchange will make a choice whether to recognise the new cryptoassets created by the fork.
New cryptoassets can only be disposed of if the exchange recognises the new cryptoassets. If the exchange does not recognise the new cryptoasset it does not change the position for the blockchain, which will show an individual as owning units of the new cryptoasset. HMRC will consider cases of difficulty as they arise.
Costs must be split on a just and reasonable basis under section 52(4) Taxation of Capital Gains Act 1992. HMRC does not prescribe any particular apportionment method. HMRC has the power to enquire into an apportionment method that it believes is not just and reasonable.
dimots said:
I read that and still don't think it makes practical sense.
I wonder if there's mileage in declaring all my btc and bch forked coins lost and writing them off at issue price for a tax break?
I'd refer it to your accountant. Section 43 (assets derived from assets) is a key clause here. And 52(4).I wonder if there's mileage in declaring all my btc and bch forked coins lost and writing them off at issue price for a tax break?
Of the 7000 accountancy firms in the U.K. 3 we’re taking payment in BTC last year:
https://www.wheretospendbitcoins.co.uk/category/ac...
https://www.wheretospendbitcoins.co.uk/category/ac...
coyft said:
NickCQ said:
coyft said:
But the treatment is no different to swapping any asset as far as CGT is concerned. Crypto isn't treated any differently.
Not saying it is, but swapping assets is something that retail customers rarely do.As I said it's no different to me agreeing to swap my shares with a bloke down the pub. If I paid £1k for my Google shares that are now valued ay £100k, I can't avoid CGT by swapping them for Facebook shares valued at £100k.
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