Gravita's tax offering to the Crypto sector

Private client: Tax on crypto gains, losses and income 

CGT and crypto: In the same way that Capital gains tax (CGT) is paid when a gain is made on the sale of certain assets, such as property or shares, when you sell cryptocurrency (crypto-asset exchange tokens) the increase of the value from when you bought the crypto, is taxable. This also includes the exchange of one crypto currency to another, all are subject to CGT.

The task of calculating the right amount of tax becomes even more daunting when many crypto investors will often have 1000s of transactions from which to track taxable gains and losses.

How Gravita can help:  To help our crypto clients overcome this problem, we have bespoke software which has the ability to take the data from the exchange and identify all the gains, losses and income owed. We can calculate the gains based on market prices and we can also help deal with currency exchange, more often than not this is from dollars into pounds sterling, but obviously we can work with any currency.   Our crypto clients find the software is much more cost effective in the speed it can deliver results, rather than through a manual process, and they have the peace of mind of its accuracy to ensure they are compliant with HMRC’s requirements.

Income tax and crypto: In the same way that the trading of stocks and shares can be subject to income tax, it is possible that the trading of cryptocurrencies can also be seen in the same way.  We urge anybody in this position to speak to us to ensure they minimise their tax liabilities when the rate of income tax can be as high as 48.25%.

IHT on crypto 

Generally, it is relatively simple to establish where an Inheritance tax (IHT) liability is due:

1. If somebody is domiciled in the UK and/or
2. If they have an asset in the UK

When it comes to cryptocurrencies however, due to the very nature of blockchain, it is much harder to trace where the asset is.  If you are UK domiciled then you will already be caught by IHT.  If you are non-UK domiciled, for the purposes of IHT, HMRC states that as the blockchain is ‘everywhere’, it is therefore deemed to be in the UK.  Accordingly, if you are tax resident in the UK, the crypto asset is deemed to be in the UK and falls within the charge to IHT.  This is obviously becoming a problem for more and more of our overseas clients which we can work with you to tackle and overcome.

Crypto and compliance

Since HMRC announced that they would be writing to tax payers who they believe hold cryptoassets, we have undoubtedly seen an increase in those letters asking such entities to correctly declare their tax liabilities in relation to crypto.  As HMRC continues to increase greater transparency across all businesses and individuals, it is vital that those with cryptoassets ensure they are compliant to avoid triggering penalties, particularly when they are trading with overseas entities.

Crypto and corporate tax

Trading in cryptocurrencies is taxable, and subject to corporation tax (within jurisdictions that have corporate tax regimes).

Tokens and utility tokens:  Trading in tokens means that an investor gains a share of the intellectual property, rather than the company, which doesn’t create income for the business but may generate a taxable transaction.  Further complexity arises when it comes to utility tokens and by their very nature that they are ‘usable’.  This is therefore recognised as income and is potentially subject to VAT.

Through the software that we use which is designed and used specifically for our crypto clients, and through the knowledge and expertise of the team who work with clients in this space, we can ensure you are fulfilling all your compliance requirements, as tax efficiently as possible.

What next?

For more information on Gravita’s tax offering to the Crypto sector, please contact Thomas Adcock.