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.
Research also finds that 84% of businesses believe that the government has not provided enough information about digital tax plans
A total of £16bn was lost through tax fraud last year, according to estimates released by Pinsent Masons
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