UK Bitcoin Investors Might Exploit Gambling Tax Loophole
UK Bitcoin tax,tax on bitcoin trading
A tax legislation loophole might allow British Bitcoin investors to classify and declare their cryptocurrency returns as gambling, potentially creating massive losses for the Government. Winnings from gambling activities are tax-free in the United Kingdom.
“Her Majesty’s Revenue and Customs is expecting to see a surge in the number of taxpayers declaring gains from cryptocurrencies this year after many investors sold their holdings after values soared, leaving them with huge profits,” a HMRC spokesperson commented, according to The Telegraph.
The loophole allows investors to declare their returns as gambling winnings, which are generally not considered investment returns and thus are tax-free. This would potentially leave the HMRC with a huge black hole in returns.
“We don’t normally tax betting and gambling because it is usually not classed as trading income. But there may be circumstances where factors such as the degree of skill and organisation would make the activity more likely to be taxable as trading income. Each case will depend on its own facts,” the spokesperson for the HMRC added.
The UK tax legislation guidelines were last updated in 2014, but at that time Bitcoin was worth less than 500 British pounds, compared to over 9,125 British pounds today.
Robert Langston of Saffery Champness, the 12th largest firm of chartered accountants in the UK, has told cryptocurrency investors to declare themselves as investors, which would result in them being more likely to pay tax on their trading income.
Bitcoin is still considered an asset under UK tax law, but given how investors and traders have made huge gains on cryptocurrencies last year, countries around the world are trying to figure out the best taxation mechanisms, with South Korea going so far as to link bank accounts to crypto exchange accounts.