21 Dec 2018
The United Kingdom has outlined its views on the taxation of cryptoassets, such as bitcoin, alongside guidance on what holders of such assets need to pay and records they should keep.
According to HMRC, individuals will be liable to pay income tax and national insurance contributions on cryptoassets they receive from employers (i.e. as a form of non-cash payment) as well as from mining, transaction confirmation and airdrops.
Mining typically involves using computers to solve difficult maths problems in order to generate new cryptoassets.
An airdrop is where someone wins or receives some tokens or other cryptoassets, such as in an advertising campaign.
Income tax will not always apply to airdrops, such as in cases where they were received without an individual doing any service.
However, airdrops that are provided in return for a service are subject to income tax either as miscellaneous income or receipts of an existing trade, the paper showed.
Regarding mining, fees or rewards received in return for mining (for transaction confirmation) are chargeable to income tax, either as trading or miscellaneous income depending on factors such as the degree of activity, organisation and risk.
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