News
20 Jan 2014 04:56pm

HMRC to review Bitcoin tax status

HMRC is reviewing the tax treatment of virtual currency Bitcoin

The Revenue has said it is looking at alternatives to the current 20% VAT on purchases of the coin, which is regarded as a voucher rather than a currency. One option the review will consider is to reclassify Bitcoin as private money – this would limit the VAT on transactions, an approach which has been fairly successful in Germany.

The review is a response to concerns from governments that it could be used for tax evasion and money laundering, and answer concerns from tax authorities that want to meet revenues from Bitcoin use.

A HMRC spokesman said they had held "constructive meetings with stakeholders" over VAT on the currency.

The value of the world’s stock of Bitcoin, which can both rise and fall, has risen from $150m to $10bn over the past year.

Bill Dodwell, head of tax policy at Deloitte, said, “Many large businesses will be put off from accepting virtual currencies such as Bitcoins given the fringe nature of the industry and lack of transparency.

“That’s not to say that a cryptocurrency will not succeed in the future. HMRC clarifying its tax treatment will give more certainty to participants in the market and over the transactions taking place. This may boost confidence in cryptocurrencies and lead to wider adoption.”

Helen Roxburgh

 

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