The latest update to Her Majesty’s Revenue and Customs (HMRC) rules introduced a digital service fee to be levied on crypto exchanges operating in the UK.
UK crypto exchanges will now have to pay a 2% tax on digital services, according to a Telegraph report. The UK tax authority, HMRC, does not recognize digital assets as financial instruments, so stock exchanges are not eligible for financial incentives.
On November 28, the government listed cryptocurrency exchanges under a technology tax imposed by the Treasury. In April 2020, a digital services tax was introduced on revenues from social media and search giants such as Facebook and Google.
The latest blow to cryptocurrency exchanges was the result of the valuation of cryptoassets by HMRC, as the regulator explained:
There are a number of cryptocurrencies, each with different characteristics. She said that since cryptocurrencies do not represent commodities, financial contracts, or money, it is unlikely that a cryptocurrency exchange would benefit from an exception for online financial markets. ”
According to CryptoUK, a trading organization representing the UK digital assets sector, the tax is unfair and likely to be passed on to investors and traders.
CEO Ian Taylor said that treating cryptocurrencies differently from other financial instruments like stocks or commodities harms the crypto sector.
He added that this is another big blow to the industry after the onerous licensing regime imposed by the Financial Conduct Authority (FCA) for stock exchanges. As of January, all UK cryptoasset companies are required to comply with AML (Anti-Money Laundering) rules and register with the FCA.
The regulator imposed a ban on crypto derivatives in January, and in June, the Financial Conduct Authority (FCA) warned consumers about 111 cryptocurrency companies not yet registered with it.
On the subject: UK Internal Revenue Service Will Pursue Cryptocurrency Tax Dodgers
In April, Cointelegraph reported that HMRC is stepping up its efforts to defraud cryptocurrency evaders and has explicitly demanded detailed information on digital asset ownership in self-assessment forms.
UK tax authorities reportedly asked several cryptocurrency exchanges to disclose customer details of transactions and holdings in August 2019.