Her Majesty the Queen Rules Out Crypto as Currency

United Kingdom’s tax authority has updated its cryptocurrency taxation policy paper for businesses and individuals.

The HMRC’s approach in this policy paper is, as expected, conservative, and it stands in line with other countries’ tax treatment for cryptocurrencies. The HMRC explicitly states that it does not consider crypto as a currency, and the policy paper uses the term “cryptoassets” and not cryptocurrency.

The policy paper on individuals considers crypto activity as a personal investment subject to capital gains tax that should be paid when crypto is sold for fiat, using crypto to pay for goods or services, gifting crypto or — unlike the position of the French tax authority — exchanging crypto for crypto.

Capital gains tax is commonly used to tax crypto activity in many countries, such as the U.S. and Israel. However, while other countries are struggling to draw the line between personal activity and professional trading, the HMRC states that crypto would fall into the definition of business activity “only in exceptional circumstances,” continuing:

“HMRC expects individuals to buy and sell cryptoassests with such frequency, level of organization and sophistication that the activity amounts to a financial trade in itself.”

The policy paper states that an employee’s salary and mining activity are subject to income tax.