ARTICLE · 04 APRIL 2014

HMRC Drops VAT On Bitcoins

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HMRC has confirmed this week that its initial tax treatment of Bitcoins as single-use vouchers did not reflect the cryptocurrency’s actual economic role.

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Richard Asquith

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Head of VAT Richard Asquith follows up on his recent Bitcoin coverage.

HMRC has confirmed this week (Brief 09/14, issued 3 March 2014) that its initial tax treatment of Bitcoins as single-use vouchers did not reflect the cryptocurrency's actual economic role as a store of wealth, exchange mechanism for goods and services or to trade for national 'fiat' currencies.

This means the 'mining' and trading of Bitcoins will now be exempt from VAT – a treatment similar to gold – and this includes exchanging Bitcoins for regular currency. Where Bitcoins are used for buying goods or services, the supplier will have to establish a fair market exchange rate for the Bitcoins in order to determine the VAT due on the supply.

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