BKL private client partner and cryptocurrency tax specialist Geraint Jones has contributed to Decrypt’s ‘rough guide on how to file your crypto taxes in the UK’.
Geraint Jones, a partner at London-based accountancy firm Berg Kaprow Lewis LLP, told Decrypt that HMRC’s view is that crypto-assets are usually chargeable assets. That means you have to pay capital gains tax when you buy, sell, and exchange them—for every single transaction.
To work out what amount is liable for capital gains tax, you have to take the sterling equivalent at purchase and the sterling equivalent at sale,” he said. In other words, if you bought 1 Bitcoin for £0.01 in 2009, and then sold it today, you’d have to pay capital gains tax on the sterling value of Bitcoin, currently £6,655, less the £0.01 you paid for the Bitcoin.
To work out the value of your crypto, you should take a “reputable exchange’s value” at the time of purchase, said Jones. You could do it by day or by hour; but you’d have to use the same methodology throughout your tax return, he said: “You couldn’t choose to do it in different ways on different exchanges according to what happened to be most convenient for you.”
Of course, this is crypto—exchanges, many of dubious quality, run by even more dubious individuals, often shut down and scrub their records clean. It isn’t always possible to download your transactions. Tough luck, said Jones. “The onus is on you to keep good records. The Revenue can fine you quite heavily if your records are inadequate.”
Where records exist, the HMRC will check, said Jones. “The HMRC are currently going to the exchanges and demanding records of everybody who has been trading through their websites. I would imagine that everyone is going to be caught.” Coinbase, eToro, and CEX.IO have all received letters from HMRC, according to Coindesk. Will HMRC bother to penalize? Definitely, said Jones. “I would always recommend that people file their tax returns,” he added.
The full article is available here on the Decrypt website.