Cryptocurrency platforms and exchanges such as Coinbase and Binance may be hit by an extra tax in the UK as authorities suggested they do not qualify as financial instruments.
HM Treasury is levying a 'tech tax' to ensure online giants such as Amazon, Google and Facebook pay a fairer share of tax.
While financial services companies are excluded from the tax, crypto exchanges in the UK will now have to pay the 2% digital services tax, the Telegraph has reported.
This is because HMRC said digital assets “are not financial instruments” such as commodities or money, so are ineligible for the financial exemptions.
The British tax office has told the crypto exchanges that they will be subject to the tax, which came into force last year.
HMRC said crypto assets “are not financial instruments” and do not qualify as commodities or money, meaning online exchanges that sell cryptocurrencies such as Bitcoin and ethereum are not able to claim an exemption for financial marketplaces.
A HMRC statement said cecause cryptocurrencies do not represent commodities, financial contracts or money, “it is unlikely that crypto asset exchanges can benefit from the exemption for online financial marketplaces.”
The digital services tax is applied to online companies that generate global revenue above £500mln and UK sales of over £25mln, and will remain in place until a new regime is introduced as part of this G20 tax pact that will see profits of large businesses taxed at least 15%.
As for personal tax rules, earlier this year crypto investors were warned that HMRC will begin demanding information on holdings in cryptocurrency for taxpayers that it investigates for tax evasion and avoidance.