Britain Will Reportedly Scrap 20% Tax on Bitcoin | Hacker News Reader

Britain Will Reportedly Scrap 20% Tax on Bitcoin

techcrunch.com

39 pointsamitkumar0120 comments

This article basically confirms what has previously been agreed by HMRC.

The initial problem is that they wrongly classified Bitcoin as 'vouchers' rather than as a digital currency. Which incurred a 20% VAT charge on the value of Bitcoin. So users would effectively have to pay 120% of the spot price to buy Bitcoins in the UK. Now that levy is only chargeable on the exchange fee (if there is one).

Although this is welcomed news the biggest obstacle still remains for British Bitcoin based businesses and that is banks. All British banks refuse to do facilitate Bitcoin related businesses due to it's unregulated status and until this changes there will not be any 'bitcoin economy' here in the UK.

Here's a solid survey of the regulatory treatment of virtual currency in Britain.

http://bitlegal.io/nation/GB.php

What confuses me here is I thought nowadays that VAT law was supposed to be harmonised with the EU (and hence why VAT law is so complex and full of bizarre edge cases). It seems the EU should have a policy on this instead that then filters down to each member state.

What do you mean by harmonized? Some countries have different VAT for different items, some have flat(ter) VATs, the amounts differ as well.

There are directives that attempt to harmonize many of the policies, though not the amounts: http://en.wikipedia.org/wiki/European_Union_value_added_tax#...

There is no tax harmonization in the EU, or even the Eurozone.

http://en.wikipedia.org/wiki/European_Union_value_added_tax

It doesn't appear to be a very strong harmonization, but it's an attempt at harmonization: "EU member states are each required to adopt a value added tax that complies with the EU VAT code."

Yeah, the EU's main interest in this is facilitating cross-border sales in the "single market". Countries can still levy whatever VAT they want on whatever items they want, but they are supposed to be moving towards a common set of terms and definitions for specifying it. The intent is that the UK can exempt books from VAT while Denmark charges 25% VAT on books, but both should at least agree on what constitutes a "book". I would think harmonizing what constitutes a "voucher" should also fall under the intent of the process.

Finally some good news from the UK.

I'm not sure if they did it in good faith or are just underestimating bitcoin after the recent issues however i welcome the change.

Maybe we can finally start paying for virtual goods in virtual currency and not have to worry about our card details getting stolen.

imho (as someone who used to have a company selling something now illegal in the UK, but which we pushed to gain a VAT ruling for..) — I suspect they're doing this less to 'be nice', rather that attributing Bitcoin (or anything else) a specific VAT status implies a tacit acceptance (read: support) of its existence by the state. This way they can continue to sit on the fence, safe in the knowledge that they can tax any profits made within existing the system, but can wash their hands if and when it all goes tits up.

Applying VAT to a currency seems strange in the first place, no wonder they are scrapping it. It's also possibly they've looked at the whole MtGox fiasco and thought it's no worth worrying about Bitcoin anymore and they rethink regulations when the outcome of the MtGox thing is known.

I'm pretty sure that's the point though - the UK has not yet begun to treat Bitcoin as a currency, but as a voucher (for which VAT would be due.)

Thank god. Perhaps someone will be able to understand how to legally use Bitcoins in the UK soon (and then they can explain it to me). I've sold some Bitcoins in the past but stopped as I have no idea how tax etc works on them (and can't find out).

If they're classified as vouchers they are no different to selling anything that gets VAT lumped on it.

If they're classified as money, then they're capital.

They probably scrapped it due to the utter impossibility of enforcing it.

Many laws aren't on the books because there's any way to positively enforce them, but rather because they give police and judges a crime to charge people with when they're doing things you'd expect to be illegal, but are being very clever about obeying the letter of the law (and bribing the right people to continue to see things that way.) I can imagine this generation's Al Capone going down for Bitcoin Tax Evasion.

If the force british citizens to declare any bitcoins they own, then sure, they might not be able to enforce it 100%.

But those not complying will be doing tax evasion. How many would risk it?

Especially if they can get their friends at the police and agencies to monitor people's internet traffic?

Trying to make it look like they're being nice instead of admitting 'we have zero way to tax this'.

That's not true at all.

It will be liable to CGT, (Capital Gains Tax, which is higher than VAT for those earning more than about $50k per year), it must be declared with your self assessment.

Not everyone has to do selfassessment (actually, most people don't).

Reply on news.ycombinator.com