Bitcoin faces many hurdles before it may become an everyday currency. For businesses, one of these hurdles is the uncertainty surrounding its tax status.
Across Europe, sales tax is known as Value Added Tax (VAT). When a nation begins to charge tax against bitcoin, many may interpret it as acceptance.
As Tom Gullen described on his blog, Her Majesty’s Revenue & Customs (HMRC) seems to be classifying bitcoins as vouchers, which means VAT would be due on any sales.
A 20% mark-up on bitcoin prices would make UK exchanges untenable. In addition to Gullen’s statement, an independent source told us that HMRC had given them the same classification.
We also spoke to Dr Tom Robinson of the UK-based bitcoin exchange BitPrice and consulting firm Blockchain Consulting, who recently attended the Financial Innovators Summit at 10 Downing Street.At the time, it was said that he “left the meeting feeling largely optimistic”.
However, his subsequent communications yielded the following statement from HMRC: “Our Policy teams’ view is that these are not currency. It is our view that the provision of bitcoins is the sale of vouchers. These are likely to be ‘single purpose’ vouchers."
In a recent article from www.coindesk.com it was highlighted that the possible application of VAT could serve to kill the bitcoin.
Following on from the meeting it was confirmed that Bitcoin have a commitment from the Treasury to consider how it could achieve recognition in the UK.
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