The Royal UK Revenue and Customs Service (HMRC) has updated its guidance on taxation of cryptoassets to include a 2% income tax for cryptocurrency exchanges.
A digital service tax was introduced in April 2020 for social media and search giants like Facebook and Google. However, after the classification of cryptocurrencies, HMRC also introduced a 2% tax on digital services income for cryptocurrency exchanges.
“There are many cryptoassets, each with different characteristics. Since cryptocurrencies are not a commodity, a financial contract or money, it is unlikely that cryptoasset exchanges can benefit other than converting them. ”
HMRC added that it does not recognize digital assets as a financial instrument and therefore cryptocurrency trading platforms and exchanges are not eligible for financial incentives.
Cryptocurrency companies in the UK said this attitude towards digital assets is detrimental to the development of the industry. Most likely, the cost of the tax will be included in the fees for services for investors and traders. In fact, this is another heavy blow to the industry following the imposition of a tight licensing system for cryptocurrency exchanges by the UK Financial Conduct Authority (FCA).
As of January, all UK cryptocurrency companies must comply with AML regulations and register with the FCA. The UK Financial Conduct Authority will allocate $ 670,000 for the training of personnel who will identify schemes for the use of cryptocurrencies in illegal activities.
The governments of the United States and the United Kingdom met earlier this month to agree to join forces to combat the illegal use of digital assets. However, Philip Hammond, who previously served as UK Treasury Secretary, believes that regulators need to change their attitude towards cryptocurrencies in order to keep up with competitors.
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