Following our previous articles on cryptoassets, HMRC has published a document: Help with VAT treatment of cryptoassets — GfC2.
This guidance sets out:
- what HMRC means by cryptoassets
- when a business needs to register
- what information a business need to collect about your customers – and why
- the rules about the place of supply for cryptoasset transactions
-
what records digital platforms and marketplaces need to keep
It is aimed at UK and overseas businesses involved in cryptoasset transactions where UK VAT may apply. It includes businesses that sell or exchange cryptoassets and businesses that operate platforms where other people do so.
Overview
Cryptoassets (sometimes called ‘tokens’ or ‘cryptocurrencies’) are a digital representation of value that are created, stored and transferred securely using public computer networks, and cannot be altered or destroyed.
There are many different types of tokens, and they can have different uses. Some tokens can represent ownership of something or the right to access particular goods or services. The asset, goods or services represented by the token are known as the underlying asset or supply. The underlying asset can be tangible or intangible, such as digital or physical art, music and collectables.
A non-fungible token (NFT) is a unique digital certificate that represents ownership of an asset. The VAT treatment of an NFT will depend on the asset it represents. For example, if the underlying asset is a piece of digital art, then the same VAT treatment as digital art will usually apply. If the underlying asset is a physical item, such as a car, then the same VATtreatment as a car will usually apply.
It is worth emphasising that there are no separate VAT rules for cryptoassets. VAT still depends on what you supply and how it is used, not the definition or description of a token
HMRC says that following these guidelines will help taxpayers reduce the risk of mistakes, VAT adjustments and penalties.