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In 2018, cryptocurrencies and other crypto assets have seen a lot of progress when it comes to having oversight and investor protection. Governments in the USA, France, Thailand, and China have seen a push towards the adoption and implementation of blockchain powered technologies and crypto assets in different fields of life.
Every major organization and government around the world seems to agree that even though cryptocurrencies have suffered through a brutal collapse in 2018, they have great potential in the future. Which is why new policies and regulations are constantly being introduced. These laws and regulations have one purpose in common: to provide oversight and help protect investors from fraud while promoting investment into these technologies. The latest example being the U.K.’s release of a tax and legislation guide for cryptocurrency investors.
After months of confusion among the taxpayer stakeholders about what they need and need not report to the authorities about their holdings, the U.K. has published a policy paper called, “Cryptoassets for Individuals.” This publication is officially endorsed by the tax collection agency HM Revenue & Customs or HMRC. The paper details the tax obligations for private investors who own, sell or buy cryptocurrencies.
According to the document, investors are expected to pay either Capital Gains Tax or Income Tax depending on the type of transactions they have been involved in. Furthermore, individuals who receive payments from an employer in the form of cryptocurrencies will be liable to pay social security contributions known as National Insurance.
In this paper, HMRC states:
“The tax treatment of crypto assets continues to develop due to the evolving nature of the underlying technology and the areas in which crypto assets are used… As such, HMRC will look at the facts of each case and apply the relevant tax provisions according to what has actually taken place (rather than by reference to terminology). Our views may evolve further as the sector develops.”
One particular aspect of taxation regulations regarding crypto assets that the paper shines some light on is the case of having your crypto assets lost, stolen or your wallet hacked. The paper states that in such cases the victim still owns the assets and has a right to recover them. So, CGT obligations remain until it is apparent that the crypto assets have become forever inaccessible. The paper also says that for those individuals who do not receive the crypto assets they have paid for cannot claim a capital loss.
The paper covers many other scenarios for tax application for the taxpaying crypto asset owners. The paper has been well received as the audiences for the legislation had been left in the dark for a long time to speculate about what might or might not be included in it. With the new policies in place, this is another step towards a safer and more stable future for crypto assets.