The CIOT and ATT have raised a number of key points in their joint submission to the Treasury’s consultation on proposals for a new UK regulatory framework for cryptoassets.
Although HMRC guidance is helpful, it does not cover the whole range of potential crypto-transactions which tax advisers are increasingly having to deal with in practice. HMRC’s approach also sometimes conflicts with the industry view. For example, where HMRC’s guidance on situs of assets (the place where property belongs for legal or taxation purposes) does not deal with the obvious problem posed by virtual assets which, because they do not exist, have no physical nature. With the location of the assets needing to be ascertained for tax purposes, there is currently no clear method for doing so. The response provides a useful summary of the position where situs is not clear and appears to fall outside any legislative provision.
It also highlights the importance of the legislation needing to be fit for purpose. With potentially millions of crypto-transactions every year conducted by automated trading mechanisms, establishing the basic tax requirements (for example, the CGT base cost) and reporting and paying any tax due could prove impossible, making non-compliance increasingly likely.
Unless it develops a regulatory and tax regime tailored to cryptoasset transactions, the UK risks falling behind other countries which have already done so, it warns.
The CIOT and ATT have raised a number of key points in their joint submission to the Treasury’s consultation on proposals for a new UK regulatory framework for cryptoassets.
Although HMRC guidance is helpful, it does not cover the whole range of potential crypto-transactions which tax advisers are increasingly having to deal with in practice. HMRC’s approach also sometimes conflicts with the industry view. For example, where HMRC’s guidance on situs of assets (the place where property belongs for legal or taxation purposes) does not deal with the obvious problem posed by virtual assets which, because they do not exist, have no physical nature. With the location of the assets needing to be ascertained for tax purposes, there is currently no clear method for doing so. The response provides a useful summary of the position where situs is not clear and appears to fall outside any legislative provision.
It also highlights the importance of the legislation needing to be fit for purpose. With potentially millions of crypto-transactions every year conducted by automated trading mechanisms, establishing the basic tax requirements (for example, the CGT base cost) and reporting and paying any tax due could prove impossible, making non-compliance increasingly likely.
Unless it develops a regulatory and tax regime tailored to cryptoasset transactions, the UK risks falling behind other countries which have already done so, it warns.
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