1 Introduction
2 What is virtual currency?
2.1 Definition of Financial Action Task Force
2.2 How is bitcoin different to earlier virtual currencies?
2.3 How is the cryptocurrency market evolving?
3 How does bitcoin software work?
4 Further applications of blockchain technology
4.1 Brief overview of the state of blockchain
4.2 Utility tokens
4.3 Security tokens
4.4 Smart Contracts
5 Income Tax
5.1 Cryptocurrency purchases and sales - Is the taxpayer conducting a trade?
5.2 Tax implications if a trade is being conducted / treatment of losses
5.3 Mining of cryptocurrency
5.4 Airdrops tax treatment
6 Capital gains tax
6.1 Introduction applies to most individuals
6.2 What constitutes a disposal of cryptocurrency?
6.3 What are the allowable costs?
6.4 Valuation of cryptocurrency assets conversion from a foreign currency
6.5 Pooling rules
6.5.1 General pooling rule
6.5.2 Purchase and sale on the same day
6.5.3 30 day-rule
6.6 Blockchain forks creation of new assets
6.7 Airdrops
6.8 Capital losses
6.9 Losing a private key crystalising a capital loss?
6.10 Fraud
7 Cryptoassets received as employment income
7.1 Cryptoassets provided in the form of Readily Convertible Assets (RSA's)
7.2 Cyrptoassets which are not in the form of RSA's
7.3 Cryptoassets provided by third parties
8 International aspects non-resident investors
8.1 Non-resident investors trading in cryptoassets
8.2 Non-resident investors realising capital gains from the sale of cryptoassets
9 International aspects offshore cryptocurrency funds
9.1 When will a cryptocurrency fund be subject to the UK offshore fund regime?
9.2 UK investor manager exemption
9.3 Importance of establishing that the fund is tax resident in the jurisdiction in which
it is incorporated
Developments in the world of blockchain and crypto-currency move fast and much has changed since HMRC's original guidance on the subject of crypto currency published in 2014. In that original guidance there was a suggestion that dealing in crypto-currency was so risky that it could be compared to gambling and therefore outside the scope of taxation. However, the revised guidance issued in December 2018 has definitely moved away from that stance and individuals holding or intending to hold crypto-currency and their advisors need to be aware of the current taxation rules. Further guidance from HMRC on the tax treatment of crypto-assets for businesss and companies is expected soon.
This book provides a background to the development of bitcoin and the application of blockchain technology and then looks at the income tax, capital gains tax and IHT treatment of any crypto-currency.
Worked examples and flowcharts/diagrams will be used where relevant to illustrate key concepts.
Crypto-currencies are increasingly being used globally and are more regulated in some territories. The bulletin will also deal with non-resident investors, and offshore crypto-currency funds and tax avoidance.
