Cryptocurrency exchanges have been targeted by the HMRC. They have been included in the Treasury’s digital tax, alongside the likes of Amazon, Facebook and Google. HMRC has stated crypto exchanges don’t qualify for the exemptions that has been granted to financial services companies in the UK. The Treasury has advised cryptocurrency exchanges they are subject to the 2% levy currently imposed on the large digital giants.
What is the Digital Services Tax?
The UK’s digital services tax (DST) charges a 2% tax on the gross revenues of multinational digital companies. The companies include those that operate search engines, social media platforms and online marketplaces. Their revenues must link to the participation of users in the UK. DST is targeted at large businesses with digital revenues exceeding £500 million, of which £25 million or more must be in UK digital service revenues. Tax is payable on the UK revenues above an allowance of £25 million per year.
What is a Cryptocurrency Exchange?
A cryptocurrency exchange is a business that enables customers to trade cryptocurrencies or digital currencies. It is also known as a digital currency exchange, or DCE for short. The exchange is an online marketplace where people can buy, sell or trade cryptocurrencies such as Bitcoin, Etherium or the many different Altcoins such as Polkadot, Harmony or Solana.
How Does a Crypto Exchange Work?
Exchanges work very similar to brokerage platforms. Each platform will offer a portal where users can create different order types to sell, buy and speculate on cryptos with other users. The online platform will allow users to trade cryptos for other assets, whether they are other digital currencies or for fiat money. A Fiat money is a type of money that isn’t backed by any other commodity such as gold, or silver. Examples of Fiat money include the pound sterling, the Euro and the US Dollar. Crypto exchanges accept credit card payments, bank transfers or payments in the form of other digital cryptocurrencies.
What are the main Cryptocurrency Exchanges in the UK?
There are hundreds of different exchange platforms to choose from. There are different factors you need to take into account including security, level of fees, wallets available and the number of Altcoins available.
The main crypto exchanges in the UK include Binance, Coinbase, Coinbase.com, Crypto.com, Gemini, eToro and Kraken. You can view a summary of the exchanges here.
If you would like any advice on your Tax Affairs, Kinsella Tax are the Tax experts. If you have any form of investigation and would like help or advice, call Kinsella on 0800 471 4546.