Although there are no plans afoot to update HMRC’s tax treatment of cryptocurrencies such as Bitcoin, HMRC has moved to clarify its position on the virtual currencies, reports Calum Fuller

Ahead of a detailed feature by Accountancy on cryptocurrencies and their tax treatment, HMRC said UK tax legislation ‘does not include any special tax rules for income, profits or gains arising from transactions involving cryptocurrencies, or for charges made in connection with cryptocurrencies’.

HMRC released its guidance note on cryptocurrencies, Brief 9 (2014): Bitcoin and other cryptocurrencies, in March 2014. It has not been updated since.

Bitcoin’s open source release came in 2009, with the price remaining fairly stable – in the tens or hundreds of dollars – before its steep rise in the latter half of 2016 and throughout 2017, which saw it peak at just shy of $18,000 (£13,275) on 15 December 2017. For context, one Bitcoin could be purchased for $776 in December 2016 equating to a rise of 2,219%. In February 2011, it hit parity with the dollar for the first time.

Given the volatility in the price of some cryptocurrencies, including Bitcoin, there had been questions from some quarters over how the value the cryptocurrencies are taxed at is determined.

HMRC told Accountancy: ‘In most cases it would expect that the value of a transaction involving cryptocurrencies to be clear, for example, where a cryptocurrency is exchanged, at arm’s length, for cash or some other item whose value is ascertainable.

‘Where value is an issue for tax purposes and is not clear, HMRC has specialist valuers who are professionally accredited. They can ascribe a market value for the cryptocurrency using generally accepted valuation principles. People who need a post-transaction valuation for capital gains purposes can send a form CG34 to HMRC to request a valuation.’

Guidance on this process is available here.

Accountancy’s feature on the taxation of cryptocurrencies will be available online on 5 February 2018 and in the March 2018 edition of the magazine.

HMRC’s guidance Brief 9 (2014): Bitcoin and other cryptocurrencies is available here.

Report by Calum Fuller