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UK rejects VAT on bitcoin trades

03 March 2014  |  7290 views  |  0 bitcoins

Her Majesty's Revenue and Customs (HMRC) has decided not to levy a 20% value-added tax on bitcoin transactions, reversing an earlier ruling that classified virtual currencies as gift vouchers.

In contrast to several other countries, including Germany, the UK is set to treat crypto-currencies in the same way as other currencies.

In a brieing paper setting out its thoughts, HMRC states: "As an EU tax, the VAT treatment for cryptocurrencies adopted by the UK must be consistent with any treatment that may eventually be implemented across the EU."

VAT will not be charged on virtual currency transactions and margins will not be taxed. Other taxes, including corporation tax, will apply, although “each case will be considered on the basis of its own individual facts and circumstances".

The small win for the crypto-currency community comes after a tough few weeks in the wake of the Mt. Gox meltdown. Following Friday's revelation that the exchange is filing for bankruptcy protection, a US customer has initiated legal proceedings.

In a complaint filed in US District Court in Chicago, plaintiff Gregory Greene says: "Mt. Gox intentionally and knowingly failed to provide its users with the level of security protection for which they paid."

Greene's suit seeks class action status on behalf of Mt. Gox users, restitution, monetary damages and other remedies.

Meanwhile, in an effort to deal with hoards of furious users, the Tokyo-based exchange - which says that it has lost bitcoins worth hundreds of millions of dollars - has set up a call centre. Callers have been posting their experiences, including language barrier issues, on Reddit.

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