Cryptocurrency is not cash, HMRC confirms

HM Revenue and Customs (HMRC) has published data on the taxation of crypto-assets, such as the Bitcoin and Ethereum cryptocurrencies. The advice states that it does not see these as cash, but rather as utility, security or exchange tokens. However, tax may be paid when these are used in lieu of money or on certain transactions.

Examples of this would include the ongoing requirement for employees to pay National Insurance even if paid in cryptocurrencies, and capital gains tax (CGT) or income tax on any transactions that will result in monetary rewards. An example of this would be where a cryptocurrency is paid for in cash, rises in value and is then sold, incurring CGT.

HMRC noted, “The tax treatment of cryptoassets continues to develop due to the evolving nature of the underlying technology and the areas in which cryptoassets are used." Significantly, HMRC does not class trade in cryptocurrencies as gambling. The guidance relates to individuals, with information on how businesses could be affected set to be published at a later date.