Tax regulators in U.K. publish fresh guidance for cryptocurrencies

Regulators in the UK are set to bring more regulatory clarity in the cryptocurrency space with HM Revenue & Customs, the United Kingdom’s tax authority, publishing updated guidance regarding crypto taxation in the nation.

According to recent reports, the tax regulator was already planning to roll out the new “Cryptoassets Manual” this week, to further strengthening past guidance and also including staking activities for the first time within the regulatory framework.

Staking is basically a process to reward cryptocurrency folders for blockchains operated by the proof-of-stake consensus mechanism. Per the update guidance, all staking activities would represent a taxable trade based on a variety of factors, including the degree of activity, organization, risk, and commerciality.

“If the mining activity does not amount to a trade, the pound sterling value (at the time of receipt) of any crypto assets awarded for successful mining will generally be taxable as income (miscellaneous income), with any appropriate expenses reducing the amount chargeable,” it added.

“If the activity does amount to a trade, any profits must be calculated according to the relevant tax rules.”

The last update regarding the taxation of cryptocurrencies was published late 2019. According to Nimesh Shah, CEO of tax consultancy Blick Rothenberg, the updated guidance is more extensive and detailed than what was available before.

“This is an improvement on what we had before but we need to remember that this is HMRC’s interpretation and the guidance does not represent law,” Shah noted.

“It’s disappointing that the government have still not legislated this complex area, and is leaving it to HMRC to make their own assessment on how the transactions should be treated. This isn’t right in my view.”

UK seeking crypto regulations

The UK government has been actively seeking to regulate the crypto sector. Last month, Her Majesty’s Treasury called for the introduction of a new UK regime for the regulation of crypto-assets with an HM Treasury-ordered review of UK fintech.

The review outlined that other economies are progressing rapidly with the development of crypto-specific frameworks such as the EU’s Markets in Crypto-Assets proposals, and urged the UK government to move fast to maintain its position as a crypto hub.

Contributed by The Daily Chain.