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TAXguide 02/2024: Taxation of cryptoassets for businesses

Technical release

Published: 28 Feb 2024 Update History

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TAXguide covering the UK taxation of cryptocurrency held by businesses including corporation tax, stamp taxes, employment income and VAT.

Cryptocurrency is a form of cryptoasset that makes use of a type of distributed ledger technology called blockchain. Cryptocurrency can be used as a means of exchange or held as an investment. A company could either acquire existing cryptocurrency (eg, by way of purchase or by accepting cryptocurrency as a means of payment for goods or services) or obtain new currency (for example, due to ‘proof of work’ or ‘proof of stake’ relating to the validation of transactions and addition of new blocks to the blockchain). 

As a starting point in understanding the UK corporation tax analysis that applies to companies, it is not essential to understand the technology that underpins cryptocurrencies; it is enough to understand that they are within the scope of taxation.

For the tax treatment of cryptocurrency for individuals, see TAXguide 01/24: Taxation of cryptoassets for individuals.

Scope of HMRC’s guidance

There are no specific UK tax rules for cryptocurrency, so existing provisions are applied to determine the tax position. This is relatively straightforward in some cases but can be challenging in others. New legislation could provide clarity in areas of uncertainty. Notably, HMRC is currently considering responses received to a consultation which considers making changes to the tax legislation in the context of both decentralised and centralised finance lending and staking. The consultation is principally focused on individuals, though the government is considering extending any new tax law to companies.

HMRC has published a Cryptoassets manual. HMRC’s manuals are internal documents that provide HMRC officers with instructions on how to approach taxation in given areas. HMRC’s cryptoassets manual sets out HMRC’s position across a range of tax issues that arise in practice in relation to cryptoassets, with a specific focus on exchange tokens, which notably includes cryptocurrency.

The business section of HMRC’s cryptoassets manual considers the taxation of sole traders, partnerships and companies. When considering the tax position of companies, it is advisable to consider HMRC’s view and to make appropriate disclosures on tax returns related to the approach which has been taken.

This TAXguide focuses on the key matters that businesses need to consider.

Approach to taxation

No specific tax laws have been enacted to apply to cryptoassets; instead, existing tax laws are applied based on the substance and nature of the activity. This means that tax law updates are not required to reflect technological or terminology changes.

Is cryptocurrency money?

HMRC does not consider cryptocurrency to be money or currency. Accordingly, provisions that specifically apply to foreign currencies do not apply to cryptoassets, such as foreign exchange rules or loan relationships.

Company taxation

HMRC guidance primarily considers the application of four corporation tax charging provisions in relationship to cryptoassets.

Trading income

HMRC comments that profits of a revenue nature must be included as trading profits if a company holds exchange tokens as part of an existing trade. For example, a trading company that accepts exchange tokens as payment for goods or services.

The business guidance expands on when returns from cryptoasset mining activities may be taxable as trading income. This point is also relevant to individuals.

HMRC states that “using a home computer while it has spare capacity to mine tokens would not normally amount to a trade. However, purchasing a bank of dedicated computers to mine tokens for an expected net profit… would probably constitute trading activity.” As is common with trading considerations, there will inevitably be a grey area in the middle where it is hard to determine if there is a trade or not.

Loan relationships

As noted above, as HMRC does not consider cryptoassets to be money it follows that, typically cryptoassets will not be within the scope of the loan relationship rules as: a) they are not money; and generally, b) they do not represent a creditor-debtor relationship.

Intangible fixed assets

HMRC comments that exchange tokens could be within these provisions if they are intangible assets for accounting purposes and are intangible fixed assets for corporation tax purposes. The latter point requires that the exchange tokens are either acquired or created for use on a continuing basis in the course of the company’s activities. HMRC considers that simply holding exchange tokens on a long-term basis will not meet this definition, even when held in the course of the company’s activities. Specific exclusions apply for certain defined assets.

Chargeable gains

If returns are not otherwise charged to corporation tax, HMRC considers that the chargeable gains rules will apply. The chargeable gains ‘pooling rules’ apply on the basis that exchange tokens are assets dealt in without identifying the particular assets disposed of or acquired. In particular, disposals are matched to acquisitions in a prescribed order:

  • same day acquisitions;
  • acquisitions within the previous 10 days (a different rule, the 30-day rule, applies to individuals); and
  • the pool.

Gains and losses attributable to different cryptoassets (eg, bitcoin and litecoin) are computed separately.

HMRC’s guidance also comments on some practical scenarios. For example, where a ‘hard fork’ occurs (essentially where the code underlying the exchange tokens splits and a new exchange token class is created), the original tax base cost must be apportioned between the old and new tokens on a just and reasonable basis.

No base cost is attributable to tokens received by way of airdrop, and so any sale proceeds would be a chargeable gain in full, assuming no other tokens of the same type are held. If there were other tokens of the same type, the above matching rules would apply to determine the gain or loss on disposal.

Venture capital schemes

No specific rules apply to determine the availability of the venture capital schemes (such as the enterprise investment scheme) where exchange tokens are involved. The usual conditions must be met, including the investee company being a trading company that does not carry out substantial non-qualifying activities. HMRC provides an example of a company that retains valuable bitcoin as having a possible additional activity of investing, which could affect eligibility for the schemes.

HMRC comments that none of the following activities will, in themselves, stop a business from meeting the qualifying conditions:

  • providing goods and services to customers that operate in the exchange tokens sector;
  • accepting tokens as payment; and
  • using distributed ledger technology as a means of recording or publishing information.

HMRC considers that the position is less certain where companies:

  • deal in exchange tokens on their own account;
  • exchange or broker exchange tokens transactions; or
  • mine cryptoassets.

HMRC’s advance assurance service may be of assistance in determining eligibility, though HMRC comments that it may decline to give advance assurance if the factual uncertainty is too great. It expects there will be a number of exchange token cases that fall into this category.

Paying employees

Where HMRC considers cryptoassets to be ‘money’s worth’, employees must pay income tax on the value of tokens received by them.

If HMRC considers that the cryptoassets is a readily convertible asset, both employee’s and employer’s national insurance contributions (NIC) are payable. In addition, PAYE must be operated to collect the income tax and NIC due. This applies even if no cash salary is paid. The employee must ‘make good’ the tax the employer has paid on their behalf within 90 days of the end of the tax year, otherwise additional income tax and NIC will apply.

Stamp taxes

HMRC comments on the interaction between exchange tokens and the three stamp taxes which are, in brief:

  • stamp duty, which is charged on instruments that transfer stocks, marketable securities and interests in partnerships that have interests in assets of this nature, where money, stock or marketable securities or debt are paid as consideration;
  • stamp duty reserve tax (SDRT), which is a related tax charged on agreements to transfer chargeable securities in exchange for money or money’s worth; and
  • stamp duty land tax (SDLT), which applies when money or money’s worth are used to pay for land in England or Northern Ireland. Scotland and Wales have their own property acquisition taxes; HMRC does not comment on these taxes in its guidance.

HMRC’s view is that cryptoassets, like Bitcoin, are currently unlikely to fall within any of the asset classes that are subject to stamp taxes on transfer. This will however be considered on a case-by-case basis, taking into account the substance of activity rather than labels used.

HMRC considers that SDRT or SDLT will be payable if cryptoassets are used to pay for property within the scope of these taxes, as they are money’s worth. The same is not true for stamp duty; exchange tokens are not within any of the chargeable consideration categories, and so stamp duty will not apply if exchange tokens are used as payment.


Currently, HMRC guidance states that VAT is due in the normal way on the supply of goods or services where exchange tokens are used to pay. VAT is not expected to be due on the transfer of the exchange token itself.

However, HMRC’s position is provisional pending further developments, including the application of EU VAT rules, and the regulation of cryptoassets. Now that the UK has left the EU, the UK position may not necessarily need to align with the EU, but some international alignment is still likely.

More clarity is needed from HMRC on the VAT position of various cryptoassets. HMRC’s guidance only covers some points regarding the VAT treatment of exchange tokens, and HMRC has no stated position on the VAT treatment of utility tokens.


HMRC’s business guidance adds further clarity to its analysis of how exchange tokens are taxable, which is based on the substance and nature of the activity and not terminology. The tax analysis may change as the technology and use thereof evolves. Therefore, we do expect to see further guidance, especially on VAT, as there have been significant changes in the market that go far beyond exchange tokens.

Tax Faculty

This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.

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