2% Digital Services Tax on UK based Crypto Assets Exchanges

HMRC issued it’s updated Digital Service Tax guidance material today in which it confirmed that cryptocurrencies are unlikely to meet the definition of financial instruments, commodities or foreign exchange and will therefore, not be exempt from the Digital Services Tax.  For further information, please click: https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual/crypto48000

This means that exchanges dealing in crypto assets will be subject to the 2% digital services tax on their revenue.

HMRC has confirmed that it will issue ‘nudge letters’ to known UK resident crypto-asset investors who it believes may have underpaid tax on their cryptocurrency transactions.

Therefore, if you have used, bought or sold crypto-assets between 6th April 2020 and 5th April 2021, you should check whether or not you have a reporting obligation to HMRC.

Although the letters are not being sent out to non-UK domiciled individuals, this does not mean that HMRC’s view on the situs tests for crypto-assets has changed.    For further information on the location of crypto assets please click: https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual/crypto22600