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Where Taxpayers and Advisers Meet
Bitcoin trading - CGT or income tax?
I bought bitcoins in 2013 - 2016. Although, inexperienced, I bought and sold to try and time the market. I also traded between bitcoins and other crypto currencies. I probably traded 100 - 200 times per year. My trading activity was not very good, however, because of the increase in coin value over that time I have increased the overall value the investment. I made marginal gains in 13 /14, a loss in 14 / 15, marginal gains in 15 / 16 and good gains in 16 / 17 (around £50k). I have assumed that this will be CGT and reported it to the local accountant that usually does my returns. He said that it should probably go in as Income Tax. Is there anyone here who is looking at this issue? After hearing this I have learnt about 'badges of trade' and other elements around what would be termed a trade. Are you working with anyone looking at the same issue? from reading the badges of trade page on this website, particularly the reference to Manzur v Revenue & Customs [2010], it seems to me that CGT would be appropriate. Any input would be highly appreciated as it will also affect 2017 / 2018.
Re: Bitcoin trading - CGT or income tax?
Currency trading is a er............ trade. (the clue is in the name)
With a pinch of salt take what I say, but don't exceed your RDA
Re: Bitcoin trading - CGT or income tax?
While I'd like to agree with you that if this looks like trade and quacks like a trade then it's probably a trade (or whatever that saying is) the caselaw tends to disagree.
Manzur is probably the most recent case and suggest that in order to turn currency trading (or stocks and shares) into a trade there needs to be a very high level of activity (he was 'only' 240-300 transactions a year), organisation, professionalism (ie a former trader undertaking his former profession in a personal capacity), providing services to clients and hedging of risks.
Crypto may tick these boxes, but Manzur was pretty active and still deemed to not be a trade.
HMRC do give some specific guidance in this https://www.gov.uk/government/publicati ... currencies but it's not really much help.
My view is generally they want to avoid calling people trading as they can then offset losses against other income.
Manzur is probably the most recent case and suggest that in order to turn currency trading (or stocks and shares) into a trade there needs to be a very high level of activity (he was 'only' 240-300 transactions a year), organisation, professionalism (ie a former trader undertaking his former profession in a personal capacity), providing services to clients and hedging of risks.
Crypto may tick these boxes, but Manzur was pretty active and still deemed to not be a trade.
HMRC do give some specific guidance in this https://www.gov.uk/government/publicati ... currencies but it's not really much help.
My view is generally they want to avoid calling people trading as they can then offset losses against other income.
Re: Bitcoin trading - CGT or income tax?
Thank you both for taking the time to reply. It is really appreciated.
The area seems to be not very clear. A trade in share-trading terms is a transaction. A transaction can be made as an individual. From the references I have seen of the 'badge of trade' approach, trading is acting as if running a business in the activity. My main issue is that the interpretation can be used to refuse to offset losses against other income if losses occur (Manzur) or, used to charge Income Tax if gains are made. It feels a bit head-I-win, tails-you-loose situation.
The area seems to be not very clear. A trade in share-trading terms is a transaction. A transaction can be made as an individual. From the references I have seen of the 'badge of trade' approach, trading is acting as if running a business in the activity. My main issue is that the interpretation can be used to refuse to offset losses against other income if losses occur (Manzur) or, used to charge Income Tax if gains are made. It feels a bit head-I-win, tails-you-loose situation.
