Crypto currency tax for businesses

HMRC has published its guidance on the taxes that a company or other businesses may have to pay if they undertake transactions in crypto currency such as bitcoin.

December 2019

The guidance looks at capital gains tax, corporation tax, income tax, national insurance, stamp duty, stamp duty reserve tax and VAT. HMRC’s guidance for individuals was published in December 2018; the taxation treatment for individuals was also covered in the ICAEW Tax Faculty’s TAXline in January 2019.

The guidance appears to be logical, taxing transactions as a tax literate person may expect them to be taxed and is similar to the taxation of crypto assets for individuals. For both corporates and individuals, the cost of crypto currency is pooled to work out the base cost for calculating the capital gain on disposal. 

However, there is a difference in the matching rule for disposals within close proximity of an acquisition. For an individual, transactions are matched if: 

• on the same day that they dispose tokens of the same crypto asset (even if the disposal took place before the acquisition) 
• within 30 days after they disposed of tokens of the same crypto asset

For a company, transactions are matched if: 

• a company acquires tokens on the same day that they dispose of tokens of the same type (even if the disposal took place first), the disposal is matched with the same-day acquisition in priority to any tokens held in an existing pool
• a company acquires tokens that would otherwise create or be added to a pool but within 10 days makes a disposal of tokens of the same type, then that disposal is matched with the acquisition within the previous nine days in priority to any tokens held in an existing pool. If there has been more than one acquisition within that period, then this rule applies on a ‘first in, first out’ basis 

This article first appeared in the ICAEW Tax Faculty’s TAXline. An article on crypto assets and companies will be published in TAXline in the new year.

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