Growing number of companies investing in Cryptoassets

Over the past year or so we have seen a growth in individuals and companies investing in Cryptoassets. This blog will provide an overview of the most common type of Cryptoassets and how the individual or company will be taxed on these.

What are Cryptoassets?

Cryptoassets are secured digital representations of value or contractual rights that can be transferred, stored or traded electronically.  There have been three main types of Cryptoassets identified by HMRC:

  1. Exchange Tokens – encompasses cryptocurrencies such as Bitcoin.  The value of exchange tokens exists based on its means of exchange and investment.
  • Utility Tokens – provides you with access to particular goods or services on a platform.  A group of businesses will normally issue the tokens and commit to accepting the tokens as payment for particular goods or services.
  • Security Tokens – provides the taxpayer with particular interests in a business in the nature of debt due by the business or a share of profits in the business.

How are Cryptoassets taxed?

The buying and selling of Cryptoassets would normally amount to an investment activity.  When this is the case, you would typically pay Capital Gains Tax on any gains you realise.

There may be occasions when activity is so frequent that you would trade in Cryptoassets.   In these circumstances, you would be subject to Income Tax or Corporation Tax on any profits that you make.  As with everything in the tax world there are always more factors to consider. 

If you wish to discuss this further please do not hesitate to contact Vicky Pickering on 01524 62801