UK ministry released a new guide for crypto owners

by in Cryptocurrency News

UK ministry released a new guide for crypto owners

The UK Internal Revenue Service (HMRC) has published an updated guide to cryptocurrency transactions.

The new document brings together guidelines for businesses and individuals. For the first time, it touches on loans secured by cryptocurrencies and staking.

According to the ministry's explanation, loans secured by cryptocurrencies are a type of credit relationship and are regulated according to standard rules.

However, when borrowing cryptocurrency, traditional credit relations do not arise between the lender and the borrower, since we are not talking about a money loan and there is no fact of a monetary transaction. This means that cryptocurrencies are not considered fiat currencies and therefore cannot apply standard regulation.

Staking for business in case of onward sale of coins is subject to capital gains tax or corporate income tax. If the goals are not related to trade, such coins are considered as other income.

Individuals, when selling cryptoassets, are also required to pay capital gains tax.

In general, HMRC adheres to the mechanism described back in 2019. The following activities are taxed on it:

  • buying/selling cryptocurrencies;
  • exchange of cryptocurrencies for other assets, including cryptocurrencies;
  • mining;
  • sale of goods and services for cryptocurrencies.

The amount of tax depends on the income/expenses and the net profit of the company. HMRC will determine the tax format for each tax return on a separate basis. Depending on the circumstances, the business will pay one or more taxes, including:

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  • income tax;
  • capital gains tax;
  • corporate tax;
  • stamp duty;
  • VAT;
  • insurance fee.

Most of the mining operations are classified as taxable events. If mined coins are not traded, they are classified as other income.

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Individuals will be required to pay income tax and insurance premiums from cryptocurrencies, which they receive as wages, through mining, transaction validation, and airdrops. Contributions to pension funds in digital assets are prohibited.

HMRC also indicated that the ownership of digital assets and their use is not illegal in the UK. The agency does not consider cryptocurrencies as a means of tax evasion or other illegal activities.

The tax authorities will continue to supplement the document.