responsibility to both protect and enhance
corporate entities, an income tax is levied
as “property,” it leaves significant room for
the stability of the financial system of the
on the profits and losses attributable to any
interpretation for future developments in the
United Kingdom.109 The Bank of England
cryptocurrency transaction.
taxation of cryptocurrency.
has evaluated the risk cryptocurrencies pose
the United Kingdom taxes the gains from
to the stability of the United Kingdom’s
transactions where an individual purchases
financial markets and determined that the
and sells cryptocurrency as an investor.
If a
the United States. On June 19, 2014, the
size of the cryptocurrency market is currently
taxpayer derives gains from such transactions,
Governor General of Canada approved
not large enough to pose a “material risk to
these gains fall within capital gains tax, and
bill C-31,124 which regulates Bitcoin as a
monetary or financial stability in the UK.”
this tax is levied against any gain made that
money-services business.125 Canada also
As such, the United Kingdom has become
involves a cryptocurrency.118 If a miner is
takes the position that cryptocurrency is
a leader in cryptocurrency integration, and it
not involved in a sale or exchange involving
not a currency and is not recognized as legal
is one of the most favorable and comfortable
cryptocurrency, “the pound sterling value
tender.126 Rather, it is a digital representation
jurisdictions for conducting cryptocurrency
(at the time of receipt) of any cryptoassets
of value that is a digital asset that functions
business.110 However, the United Kingdom
awarded for successful mining will be taxable
as a medium of exchange for goods and
has not issued a final regulation as to the
as income (miscellaneous income) with any
services.127 Furthermore, taxpayers have to
legal status of cryptocurrency, and it does
appropriate expenses reducing the amount
establish if a cryptocurrency activity results
not consider cryptoassets to be currency
chargeable.”
Furthermore, the United
in income or capital because this affects the
or money.
Regarding the taxation of
Kingdom’s guidance provides that fees or
way the revenue is treated for income tax
cryptocurrency, Her Majesty’s Revenue
rewards received “in return for mining
purposes.128 Not all taxpayers who buy and
and Customs (the equivalent of the United
(for transaction confirmation) are also
sell cryptocurrency are carrying on business
States’ Department of Treasury) notes that
chargeable to Income Tax, either as trading
activity, and such determinations are made on
“[c]ryptocurrencies have a unique identity
or miscellaneous income depending on the:
a case by case basis.129 For miners, the income
and cannot therefore be directly compared
degree of activity, organization, risk, and
tax treatment is different depending on
to any other form of investment activity or
commerciality.”
whether their mining activities are a personal
111
payment mechanism.”112
116
Generally,
117
119
120
In evaluating the United Kingdom’s
C. Canada Canada regulates Bitcoin similarly to
activity (a hobby) or a business activity; this
If a taxpayer receives income from
regime for the taxation of cryptocurrency, it
cryptocurrencies, taxation of that income is
closely resembles that of the United States
A unique feature about the
dependent upon the “activities and parties
in many ways, including the ambiguity
Canada Revenue Agency’s treatment of
involved.”
Furthermore, a value added
and the penalties. However, the United
cryptocurrency involves barter transactions.
tax, which is essentially the equivalent to
Kingdom does not go so far as to say that
A barter transaction occurs when two parties
a sales tax in the United States) is only
cryptocurrency is property, as the United
exchange goods or services and carry out
applicable when suppliers sell goods or
States has declared.121 The United Kingdom
that exchange without using legal currency.
services in the United Kingdom in exchange
has released a statement deeming that
When a taxpayer uses cryptocurrency to pay
113
is decided case by case.130
For corporate entities,
cryptocurrencies are “cryptographically
for goods or services, the Canada Revenue
if any company enters into transactions
secured digital representations of value or
Agency treats it as a barter transaction for
that involves cryptocurrencies, these
contractual rights that can be transferred,
income tax purposes.131 That is, the taxpayer
transactions are treated in the same manner
stored, and traded electronically.” 122
must include in their income the amount
as normal transactions under the current
However, the United Kingdom “does not
of income they would have received if the
corporate tax rules; thus, any gains made
consider cryptoassets to be currency or
taxpayer had been paid in dollars rather than
are taxed accordingly under the United
money.”
Because the United Kingdom
cryptocurrency. However, Canadian citizens
Kingdom’s corporate tax rules.115 For non-
has not definitively declared cryptocurrency
who use cryptocurrency in Canada need
for cryptocurrency.
114
123
123
Currents 24.2 2021
