Published on March 2, 2014 at 21:21 GMT | Europe, Regulation
The UK’s tax agency is set to reverse an earlier ruling that classified virtual currencies as gift vouchers, exempting digital currency trading from a 20% value added tax (VAT).
Expected to be formally announced this week, the ruling would find HM Revenue and Customs (HMRC), the UK’s customs and tax department, classifying virtual currencies as assets or private money, not as vouchers that required a tax on the value of the coins.
Tom Robinson, co-founder of London-based digital currency storage specialist Elliptic and a director of the soon-to-launch industry group U.K. Digital Currency Association, lauded the decision by the tax agency, telling CoinDesk:
“I think this is the most progressive treatment of cryptocurrencies in the world. This is the most forward thinking and comprehensive advice in regards to taxation.”HMRC had previously indicated it would consider rethinking its treatment of digital currency in December.
Reports say other taxes would still apply to businesses that buy, sell or exchange bitcoin. However, notably, bitcoin businesses will not be charged a tax on margins.
The news follows reports that the UK’s Payments Council, the organisation that sets strategy for payments, is assessing digital currencies, and amid increasing innovation from the local community that has seen the opening of bitcoin ATM alternatives and release of physical bitcoin price tags.
An open dialogue
Elliptic and other UK-based bitcoin businesses had earlier contacted the HMRC in an attempt to inspire UK lawmakers to rethink their classification of bitcoin, suggesting that the VAT would discourage UK consumers from investing in the ecosystem and make it harder for domestic companies to compete globally.The result, however, was that HMRC opened up discussions with the community.
Robinson indicates that in early meetings, UK lawmakers asked questions about various digital currency activities, such as mining, though the larger focus was the overall taxation of the new currencies.
Impact
The news spread quickly across the bitcoin community, with many lauding it as a validation of bitcoin at a time when the industry is in need of good news.Further, though undeniably positive, others in the community suggested that still more work needs to be done to ensure the growth of digital currencies in the UK.
The news is notable as most recent regulatory statements in the wake of operational issues at the now-bankrupt Japan-based exchange Mt. Gox had been trending negative. Vietnam became the latest to speak out against bitcoin this week, citing Mt. Gox specifically, though over the last month, a slew of countries – from Hungary to Cyprus to Kazakhstan – have all issued warnings.
Image credit: Value added tax visualization via Shutterstock
