Disclaimer: This article is intended as an informative piece. This is not accounting or tax advice. Please speak to a qualified tax professional about your specific circumstances before acting upon any of the information in this article.
HMRC describes cryptoassets as digital representations of value that rely on a cryptographically secured distributed ledger, or similar technology, to validate and secure transactions - see CRYPTO10100.
They do not consider cryptoassets such as Bitcoin and Ethereum to be currency or money. The government’s 2018 Cryptoassets Taskforce report grouped cryptoassets into three broad categories: exchange tokens, utility tokens and security tokens.
Exchange tokens – these are intended to be used as a method of payment and include cryptocurrencies like Bitcoin and Litecoin. They do not provide any rights or access to goods or services.
Utility tokens - these provide the holder with access to particular goods or services on a platform usually using Distributed Ledger Technology (DLT).
Security tokens - these may provide the holder with particular interests in a business, including debt due by the business or a share of profits in the business.
HMRC’s current Cryptoassets Manual also identifies stablecoins as a main type of cryptoasset and separately addresses non-fungible tokens (NFTs) in its tax guidance.
HMRC says the tax treatment of a token depends on its nature and use, not its name or definition. A tax charge may arise when cryptoassets are received or disposed of, depending on the transaction and the person’s circumstances.
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