Category: HMRC

Taxation of Crypto assets

This article deals with `exchange tokens` like Bitcoins, not with assets like NFTs or stablecoins. It is written for Individual tax payers.

HMRC does not treat Crypto as currency or money1.

Most common scenario is of an individual investing in Crypto optimistic for an increase in its value. Any gains or loss in such a case is treated similar to investment in shares. Rules such as pooling, same day and 30-day2 apply even if crypto held in different exchanges9.

Please note sale of crypto takes place even if it is exchanged for another crypto asset, it is used to buy goods/services or given away to a person (not their spouse)8.

International matters

Gains need to calculated in pound sterling3.

Location of asset – In HMRC’s view, exchange tokens are located where the owner is tax-resident. This rule will be of importance to remittance basis users, as their crypto gains will be taxable even if they do not remit funds to the UK4.

Other taxes

Stamp duty – not applicable5.

VAT – not applicable. But if a trader sells goods or services in exchange of crypto assets, the trader will need to charge VAT6.

Loss

In case of fraud – HMRC does not consider theft as a sale, a negligible value claim can be made7.

In case of loss – similar treatment as in case of shares. Three things to be aware of:

  1. Capital losses will be adjusted against gains in same year.
  2. Carry forward indefinitely and adjust against first available gains.
  3. Cannot be carried back except in case of death.

Disclosure service

HMRC has launched a cryto disclosure service for individuals who may have not paid the correct amount of tax in past tax years.8.

Notes:

  1. CRYPTO10100 means loan relationship rules do not apply.
  2. TCGA 92 sections Pooling (104) Same-day (105) 30-day (106A)
  3. CRYPTO40100
  4. CRYPTO22600
  5. CRYPTO44100
  6. CRYPTO45000
  7. CRYPTO22450
  8. Check cryptoasset disclosures, HMRC tells taxpayers | ICAEW
  9. Share and securities matching rules apply to assets which are fungible assets i.e. assets which are not individually identifiable. Tolley annual CGT book 64.2

Further readings:

Taxation of Dividends

In this article we look at the intricacies of tax computation on dividend income for individuals.

Tax rates

We are aware that dividends are taxed at special rates which are lower than non-saving rates. But, if the foreign income is taxed on the remittance basis, they are taxed at basic, higher or additional rates.1

Resident individuals

Stock dividends from non-UK companies are not taxable. 2

The charge to tax on foreign dividends is on the full amount of the dividends arising in the tax year – ITTOIA05/403. This is different from the paid basis that applies to dividends and other distributions from other UK companies. 3

Dividends from venture capital trusts are exempt from tax, up to shares worth £200k.4

Non-resident individuals

Where a non-resident receives dividend from a UK company, he is treated as if he has already paid tax @ dividend ordinary rate. But this credit is not repayable. 5

Withholding tax

No withholding tax in the UK. But payments to non-residents, UK (under many DTAAs) is entitled to impose 15% withholding tax.

High Income benefit charge (HICBC) and Dividend allowance

Dividend allowance (currently 2024-25 at £500) may reduce tax liability but is counted as income for HICBC calculation.

Dividend allowance, personal saving allowance and starting rate for savings income do not apply to foreign income remitted to the UK.7

Dividends from UK-REITs

Dividends are received net of basic rate (20%) income tax and are treated as property income.8

Bonus

  1. Expenditure: professional fees – fees for advice about markets or management of a portfolio, not allowable.6

Notes

  1. RDRM31320
  2. ITTOIA05 Sec 402 (4) and SAIM5210
  3. SAIM5210
  4. VCM51200
  5. ITTOIA 2005 Sec 399.
  6. CG15280
  7. ITA 2007, s13 and s18
  8. UK REITs – Alan Melville Chapter 2

Companies House Hub

RA Articles

How to amend Companies house accounts? – Roy Accountants

Generic Info re Companies House – Roy Accountants

Small companies, which documents I have to file and where? – Roy Accountants

Process Note – Closing a Company – Roy Accountants

Register of Overseas Entity – Roy Accountants

Dormant Company – Roy Accountants

Companies House guidance

Guidance for limited companies, partnerships and other company types – GOV.UK

Running a limited company – GOV.UK


Process Note – Closing a Company

  1. File Application Online.
  2. Company Director will receive an email from Companies House (CH), he/she signs the application online.
  3. We log back in Companies House Account and pay the fee, only then application is accepted and application reference number generated by Companies House.
  4. Provide Companies House acknowledgement to Client.

Death and taxes

What to do when a tax payer dies ?

Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes — Benjamin Franklin, in a letter to Jean-Baptiste Le Roy, 1789

10th August 2020

Step 1: Use Government’s Tell Us Once (TUO) Service:
Via this service you inform a number of government organisations including HMRC about the death. Please note you will need a lot of information before you use this service. So check there website before calling – click here.


Step 2: Ascertain whether there was a Will?
Tax affairs of the deceased are handled by the Personal Representatives (PR).In case a Will is present, PRs are called Executors. In its absence they are called Administrators.

Step 3: Use HMRC Bereavement guide.

Step 4: Do PRs need to apply for Probate?
See basic guide here. Probate is not required all cases

Step 5: HMRC will send a tax return within 3 months with instructions. Submission back by post. No action needs to be taken unless the tax return arrives with instructions.

Sources:
1 – ICAEW Website
2 – Citizen Advice
3 – Gov.uk – After a death
4- ATT Website

18th September 2020

Two Tax returns received from HMRC:

Tax year 2019-20File in 90 days
Period 6th April 2020 till the date of death.File by 31st Oct 2021

Please note these tax returns do not have tax computation sections, HMRC will compute the tax payable and send the bill.

Bonus:

Agent authorisation for deceased taxpayers made easier : see ICAEW article.

Please note allowances like Married Couple’s allowance, Marriage Allowance and Blind Person’s Allowance can be transferred from the person who died to the surviving partner in the year of death. Source : Tax Adviser Magazine

HMRC Contacts:

  1. Self assessment forms ordering (paper returns) – 0300 200 3610. Incase there is delay in getting the forms, please call this line. Agents can call without Agent authorisation in place but this team can only re-issue the forms if death is noted in HMRC systems.
  2. Bereavement and deceased estate Helpline on 0300 322 9620. Agents should also use this helpline for deceased estates in preference to the Agent Dedicated Line (ADL) to speak to the right advisers first time. [Agent update 122]