New guidance was released yesterday by HMRC saying that previous plans to impose VAT on Bitcoin in the UK would be scrapped.
The document stated that both Bitcoin trading and mining – the process in which the currency is created – would be out of scope of VAT.
The result of this policy is that all cryptocurrencies like Bitcoin will now be treated as assets or private money, rather than vouchers as was previously planned.
Tom Robinson, co-founder of UK-based digital currency storage specialists, Elliptic, told CoinDesk:
“I think this is the most progressive treatment of cryptocurrencies in the world. This is the most forward thinking and comprehensive advice in regards to taxation.”
Despite this decision, corporation, capital gains and income tax will still be charged where appropriate.
“The tax treatments outlined in this brief are for tax purposes only. They in no way reflect on the treatment of cryptocurrencies for regulatory or other purposes.
“Given the evolutionary nature of these cryptocurrencies, HMRC will issue further guidance as appropriate.”
At the time of writing one Bitcoin is currently worth approximately $650 (£410), with the market valued at around $8.5 billion (£5 billion).