HM Revenue & Customs has finalised its position on the taxation of cryptocurrencies such as bitcoin and will release a briefing to the public later this month.
The briefing, expected to be made public "in the next week or so" according to a statement by the UK Digital Currency Association, will provide clear rules on the tax liabilities for individuals and businesses handling bitcoin and other cryptocurrencies.
Constructed through months of meetings with the bitcoin community, the guidelines are said to be "some of the most sophisticated and forward-thinking issued by tax authorities anywhere in the world," the UKDCA said, adding: "The briefing suggests that cryptocurrencies should be treated almost identically to other currencies, in terms of taxation."
By providing a framework for bitcoin legislation for both individual users and businesses, HMRC's guidelines will give further legitimacy to digital cryptocurrencies and could "lead to a gold rush of digital currency businesses to the UK," UKDCA said, further cementing the country's status as the capital for innovation in financial technologies.
Much-needed clarity to bitcoin use
Tom Robinson, director of the UKDCA and co-founder of Elliptic, a London-based digital currency services company, said: "This briefing gives much-needed clarity to digital currency businesses, many of whom had been looking to move offshore. The UKDCA looks forward to working with financial regulators to further clarify the legal status of digital currencies and ensure that the UK takes the lead in developing this highly innovative technology".
The news comes after months of meetings between UKDCA representatives and both the Treasury and HMRC. The UKDCA provided technical information on how digital currencies work, as well as how they are used by individuals and businesses in the UK.
In an email sent to IBTimes UK, Robinson said: "We have been discussing cryptocurrencies with HMRC for some time. They have now finalised their position with regards to the taxation of bitcoin and other cryptocurrencies, and they have informed us that they will be releasing a public 'briefing' at some point in the next week or so.
"We see this as a huge step for Bitcoin and other digital currencies, and is one of the most significant rulings made so far, worldwide."
Bill Dodwell, head of tax policy at Deloitte, said: "Charging VAT on the gross value of Bitcoins sold to consumers makes little sense – as it would make it uneconomic for traders to operate in the UK and would simply drive the market offshore. It would therefore be sensible to exempt Bitcoin from VAT – which would also have the benefit of reducing the scope for VAT fraud."