Bitcoin - the Revenue comes calling

It is that time of year many a self-employed person dreads, the deadline to submit your tax return and pay anything you owe. But this year there is a question a select few should be asking themselves - have I profited from my investment in crypto-currencies?

If you have, you could be liable for tax.

In 2014 Revenue & Customs published guidelines making clear the different taxes that apply to any earnings from crypto-currencies.

For most people who have bought a few bitcoins some years ago, it is Capital Gains Tax that will be relevant.

This will apply to any profits, once you hit the £11,300 CGT threshold, not just if they are converted into a standard currency but if they are used to buy other crypto-currencies such as Ethereum or to invest in initial coin offerings (ICOs).

But in recent weeks there is some evidence that a few people are making trading in crypto-currencies a full-time job, in which case they are likely to be liable for income tax on their earnings.

Now, the acceleration in the value of Bitcoin and other crypto-currencies happened over the course of 2017 so it is unlikely many people will have incurred tax liabilities in 2016-17, the year HMRC is currently examining.

Fraudulent tactics
But over recent months there has been a flood of Bitcoin money heading into everything from ICOs to property - so next year there should in theory be a big boost for the government's Capital Gains Tax receipts.

One accountant told me plenty of his clients had piled into Bitcoin but seemed unaware of the tax implications.

What is clear is the whole crypto-currency industry is now under the spotlight of regulators around the world.

They are concerned not just about tax evasion but money laundering and major fraud.

In the United States this week the Securities and Exchange Commission got a court order to halt an ICO attempting to raise $1bn (£0.7bn) to fund what was claimed to be the world's first "decentralised" bank.

The regulator alleges this was a scam that had already used what it described as fraudulent tactics to raise as much as $600m, including failing to disclose the criminal background of key executives.

AriseBank has blamed the dispute on "confusion" over its activities and crypto-currencies.

Accountants have a warning for those who invest their crypto-currency gains in schemes that turn out to be fraudulent - if you lose your money, you won't even be able to write it off against tax.

Source: http://www.bbc.com/news