The UK tax authority, HM Revenue & Customs (“HMRC”), published, on November 1, 2019 guidance for companies and businesses on how tax transactions involving cryptoasset exchange tokens (such as Bitcoin) will be taxed. This covers liability to corporation tax, capital gains tax, employment taxes, VAT and stamp duties. Much will depend on whether or not the activity involving exchange tokens amounts to trading or not.

Following are the key points for businesses.

Cryptoassets are not money or currency. HMRC do not consider any of the current types of cryptoassets to be money or currency. This means that the UK tax rules on foreign currency, exchange gains and losses and designated currency elections do not apply.

Trading or not? Profits from a trading activity in exchange tokens will form part of a business’s taxable trading profits. If an activity concerning an exchange token is not a trading activity and not charged to corporation tax in another way (e.g. under the intangibles rules – see below), the activity will be the disposal of a capital asset and potentially will give rise to a taxable chargeable gain (or allowable loss).

Loan relationships. In most cases, because exchange tokens are not money, the loan relationships rules that give rise to taxable credits and allowable debits for lender and borrower respectively will not apply. However if exchange tokens have been provided as collateral security for an ordinary loan (of money), a loan relationship will exist, along with its tax consequences.

Intangibles rules. Companies that account for exchange tokens as intangible assets may be taxed under the corporate intangibles rules (which also give rise to credits and debits for tax purposes).

VAT. Financial services supplied by bitcoin exchanges (e.g. exchanging bitcoin for legal tender and vice versa) are exempt from VAT. This is a restatement of HMRC’s position from 2014, which was subsequently confirmed in a decision of the CJEU (Hedquist).

Employment taxes. If an employer pays exchange tokens to an employee as earnings, the tokens count as “money’s worth” and are subject to income tax and National Insurance Contributions.

Stamp duties. Stamp duty and stamp duty reserve tax (“SDRT”) apply to transfers of stock or marketable securities”. Exchange tokens are unlikely to fall within that definition, although transactions will be considered on a case by case basis. Exchange tokens would not be regarded as “money” and so could not be consideration for stamp duty purposes, but would count as “money’s worth” for SDRT (and for that matter for stamp duty land tax) purposes. Where a debt in the form of exchange tokens is released or assumed in consideration for the transfer of shares, this could count as chargeable consideration for stamp duty purposes and could attract a charge of 0.5% unless any reliefs or exemptions apply.


Alistair Craig is a partner in Baker McKenzie's London office. Before joining the Firm in 2013, Alistair worked in the transaction tax and international tax services groups of a Big 4 accounting firm for many years. Alistair advises on all areas of UK corporate tax, with a particular focus on cross-border M&A work. This includes tax structuring, tax due diligence and post-transaction integration. He also counsels clients on general international tax advisory matters, including complex group reorganisations, cross-border financing and supply chain structures.