New Cryptocurrency Bitcoin Cash

[TomGood2]

Hi

I've read a fair about CGT for Bitcoin, and indeed paid a fairly hefty amount in my last tax return.

This year in August all holders of Bitcoin were freely awarded the same amount in a new currency called Bitcoin Cash, which can be claimed and sold.

We did't buy it, it's free. I would assume when selling it a gain of 100% would apply for CGT purposes?

Just making sure I understand my tax obligations when selling it

[TomGood2]

OK seems no one knows

I'll assume it's 100% gain for CGT purposes.

[someone]

I don't know.

But I wouldn't assume it's all gain.

Reasons: If someone gives you something, they pay CGT on the market value of the gift and you acquire it at market value for CGT purposes. (I'm pretty sure this won't apply here as this rule is to avoid being charged CGT twice on the same gain but shows that an assumption of zero cost of acquisition doesn't always apply)

Other things to compare with:
If a company splits off a subsiduary and you get shares in that new company, how are those new shares taxed for CGT - is the original price 'shared'? (I don't know the answer but others might)

[TomGood2]

Thanks for that reply - does anyone know?

[unknown1]

My personal understanding (with the disclaimer that I am not a professional expert):

Your original holding is split in two distinct holdings. In theory (and in practice, albeit for only a millisecond) the value of the original holding just before the fork is the same as the sum of the two holdings immediately after the fork. It's possible that only one of the holdings will survive, and a priori you don't know which one that would be. I would view the entire holdings together, and selling any part of it I would see it as reducing my original cost basis (similar to a return of capital in a company). If you bought say BTC at £1000 and then sold BCH at £400, then BCH sale doesn't result in any CGT, but the BTC cost basis is now £600. If you had bought BTC at £100 and then sold the BCH at £400, then I would consider £300 as capital gains (with one caveat here that they could be considered gambling winnings, for which I am going to start a separate post), and the original cost basis for the remaining BTC dropping to zero.