THE RATE at which Bitcoin purchases are taxed is under review by HM Revenue & Customs, amid fears that the virtual currency may be used as part of tax evasion and money laundering.
Traders have raised concerns that the 20% VAT rate attached to the online currency made their businesses uncompetitive on a global level, and encouraged them to consider more favourable jurisdictions, the Financial Times reports.
In the last year, the value of Bitcoin has grown significantly from $150m (£110m) to $10bn and regulators are keen to clarify its status.
One option open to HMRC is to follow Germany’s lead in considering it private money, which would limit the VAT on transactions to the commission charged by trading exchanges.
“We have held constructive meetings with stakeholders but this is a complex issue, and we will continue to listen to arguments for alternative VAT treatments under existing VAT law,” HMRC said.
The possibility of treating Bitcoin as an official currency has been ruled out in the UK, although other ways of viewing the virtual currency have been put forward, with parallels drawn with unofficial local currencies, property, barter and gold, each of which have a variety of tax treatments.
HMRC is continuing to ramp up the number of raids on premises it carries out as part of criminal investigations, searching 761 properties in the last year
Lord Howard Leigh of Hurley discusses the government’s initiatives to mitigate tax avoidance and evasion
Top 50+50: Demand for tax advisory services remains high, but fee pressure is expected in relation to compliance services
The demand for tax advisory services remains high and this looks to continue; but fee pressure is expected in relation to compliance services as the “Making Tax Digital” initiative is rolled out,
While some resistance to change is to be expected, the degree of controversy surrounding HMRC's Making Tax Digital proposals has surprised the government