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RippleGambler

UK HMRC finally provide tax guidance on cryptocurrency.

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It looks like punishment on individual traders but situation as was for non traders. I.e traders will pay income tax hodlers capital gains. 

I'll be sending this on to my accountant and if it affects you I'd recommend doing the same. 

It's fantastic to have some clarity on the issue. Anyone have any thoughts to share?

https://www.gov.uk/government/publications/tax-on-cryptoassets/cryptoassets-for-individuals

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My understanding is that disposal of a cryptoasset (conversion to GBP) will incur a liability under Capital Gains Tax regulations. You will only pay income tax if you are earning XRP directly from an employer (so does not apply if you're self-employed 'trader'), as a non-cash option. 

That means that lower rate payers (earning below £46,350) will pay 10% capital gains tax on anything above £11,700 (the tax free allowance) earned, until your annual income breaches the higher rate threshold (£46,350). At this point you are classes as a 'higher rate payer' and will have to pay 20% capital gains tax on any further earnings. If you are already a higher rate payer, then you'll get your £11,700 tax free allowance, and then just pay the flat 20% rate. 

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To clarify my opinion, I think that in order to qualify to be paying Income Tax rather than Capital Gains Tax you would have be trading as the Director of a private limited company, or something along those lines. 

Obviously seek clarification from a tax expert, but it seems pretty cut and dry to me. 

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Crypto to crypto transactions now count as a disposal of the former asset and will be liable for CGT.

So for example, if you buy XRP using BTC, you must keep a record of the relative GBP value of the BTC at that moment, and HMRC will want 20% of any gain in the BTC price (the price gain since you originally bought the BTC). 

So how does this work with XRP being used as a bridge currency. It's quite tricky. According to HMRC's rules, if an institution uses its own XRP to facilitate a cross border payment (which they may do in some instances), they will be liable for CGT because they will in effect be disposing of the XRP when they buy the destination currency. This may have some effect on the utility of XRP.

These types of rules begin to diminish the attractiveness of investing in crypto. Not a severe blow by any means, but probably creates sufficient barriers to entry (i.e. tax savviness) to lop off some of the long tail.

Edited by JA8

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6 minutes ago, Cometome said:

This actually penalizes banks and payment providers to use xrp, they will need to pay taxes everytime they convert xrp to fiat...

Incorrect. As these guidelines are for individuals and according to the publication, the corporate side of tax liabilities will be published at a later date. So for now, their heads are still revolving around how to tax use cases. 

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In most instances, an xRapid transaction will take just seconds and liquidity is on demand. It's unclear how **** HMRC will want to be. I assume that corporation tax won't be applicable where almost-instant transactions are occurring.

But, depending on how closely HMRC's rules for institutions will match the published rules for individuals , it may affect institutions that want to use their own XRP holdings to facilitate transactions through xRapid. For example, in cases where the on-demand xRapid liquidity isn't sufficient to cover the size of the transaction. 

Another consideration is whether HMRC will deem xRapid use in itself to comprise trading activity.  

Edited by JA8

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48 minutes ago, RippleGambler said:

It looks like punishment on individual traders but situation as was for non traders. I.e traders will pay income tax hodlers capital gains. 

I'll be sending this on to my accountant and if it affects you I'd recommend doing the same. 

It's fantastic to have some clarity on the issue. Anyone have any thoughts to share?

https://www.gov.uk/government/publications/tax-on-cryptoassets/cryptoassets-for-individuals

From the document: “They will be liable to pay Capital Gains Tax when they dispose (transaction) of their cryptoassets.” 

My thoughts are that with this clarity the UK government does not understand what ‘crypto assets/money’ are/is. If you want to use XRP to buy (transaction) a new shirt or book a hotel people you will have to pay Capital Gains Tax.... have they lost their minds?

This is like killing crypto assets in one blow.... it shows again that greed kills everything. 

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keep in mind you need to realize a Gain to be liable for taxes...short term trading using XRP as a bridge should not really be an issue given it settles so quickly, but the hassle is the need to track your cost, across all transactions starting from the original fiat used to make the 1st purchase...no different than reporting currency gains for folks who do that kind of trading...as with all things $, record keeping is key, but a pain nonetheless

Canada taxes gains on crypto (crypto to crypto/crypto to fiat) in the same manner.

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9 minutes ago, cryptoxrp said:

From the document: “They will be liable to pay Capital Gains Tax when they dispose (transaction) of their cryptoassets.” 

My thoughts are that with this clarity the UK government does not understand what ‘crypto assets/money’ are/is. If you want to use XRP to buy (transaction) a new shirt or book a hotel people you will have to pay Capital Gains Tax.... have they lost their minds?

This is like killing crypto assets in one blow.... it shows again that greed kills everything. 

Yep, in fairness they've obviously tried to use existing systems, and applied them to what should be a new asset class with completely different taxation (or none!). They've said they don't consider crypto is a currency, so yes... it looks like you're right. This will in effect add 20% CGT to the price of your coffee :)

Edited by JA8

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10 minutes ago, GrayFox said:

Incorrect. As these guidelines are for individuals and according to the publication, the corporate side of tax liabilities will be published at a later date. So for now, their heads are still revolving around how to tax use cases. 

They are not treating crypto as a currency,you need to pay taxes even if you use it to buy cup of coffee,they not gonna change the definition to a currency just for corporates

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57 minutes ago, Tripple said:

My understanding is that disposal of a cryptoasset (conversion to GBP) will incur a liability under Capital Gains Tax regulations. You will only pay income tax if you are earning XRP directly from an employer (so does not apply if you're self-employed 'trader'), as a non-cash option. 

That means that lower rate payers (earning below £46,350) will pay 10% capital gains tax on anything above £11,700 (the tax free allowance) earned, until your annual income breaches the higher rate threshold (£46,350). At this point you are classes as a 'higher rate payer' and will have to pay 20% capital gains tax on any further earnings. If you are already a higher rate payer, then you'll get your £11,700 tax free allowance, and then just pay the flat 20% rate. 

This is wrong, they clarify the position later in the text: 

Only in exceptional circumstances would HMRC expect individuals to buy and sell cryptoassets with such frequency, level of organisation and sophistication that the activity amounts to a financial trade in itself. If it is considered to be trading then Income Tax will take priority over Capital Gains Tax and will apply to profits (or losses) as it would be considered as a business

 

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36 minutes ago, JA8 said:

Yep, in fairness they've obviously tried to use existing systems to wrap around these newer systems. They've said they don't consider crypto is a currency, so yes... it looks like you're right. This will in effect add 20% to the price of your coffee :)

Agree, exactly. However the same is not the case when you buy the same cup of coffee with Euros or Pound Sterling. To create a level playing field for crypto's to be used in 'day to day life' they must be able to transact under the same rules as fiat. This is real government/civil servant stupidity of the highest level, no one can/will except this.

Just imagine buying 1 million pound sterling with dollars. Do I then pay Capital Gains Tax? The answer is no. And now we buy 1 million pound sterling with XRP and suddenly you have to pay 20% tax.... :crazy:... For that transaction Xrapid is 'dead in the water'.

Edited by cryptoxrp

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3 minutes ago, Cometome said:

They are not treating crypto as a currency,you need to pay taxes even if you use it to buy cup of coffee,they not gonna change the definition to a currency just for corporates

CGT doesn't apply to companies. Companies pay corporation tax. This looks like the green light for me companies wise. 

It's a minor blow for individuals in the cgt applying to purchases but you have Nil reporting requirement below 11.7k x by 5 you would need to spend £58.5k (excluding rest of portfolio) to be liable. Won't affect many. 

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