Cryptocurrency (Cryptoassets)

Cryptocurrency (Cryptoassets)

Baker Tilly Staples Rodway has people in all our Member Firms with experience and expertise in the treatment of cryptoassets.

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Specifically, we can assist with advice around tax obligations and the treatment of transactions involving cryptoassets. We also prepare webinars and other advisory content to provide further insight into the cryptoasset space. Here's some guidance from our team around the changing tax view of cryptoassets.

 

Guidance for those who invest in and own cryptoassets

You may know it as cryptocurrency, but from the IRD’s point of view, the correct term is cryptoassets and the currency is taxed as if it's an asset rather than a currency.

The IRD has recently released guidance on cryptoassets for individuals, businesses and taxing cryptoasset income, with the emphasis being around transacting with cryptoassets. Our team has put together a handy overview of the ins and outs of the tax treatment of cryptoassets for investors.

If I dispose of my cryptoassets, will I be taxed?

You may be taxed on disposal of cryptoassets depending on your initial purpose/intention at the time of purchase. Your purpose will also be determined by certain circumstances:

  • Nature of the asset
  • Circumstances of the purchase
  • Number of similar transactions
  • Length of time the asset is held
  • Circumstances of use and disposal of the asset
What actually is a "disposal" of cryptoassets?

A disposal of cryptoassets occurs when the crypto is sold or swapped. A swap is defined as the disposal of one cryptoasset and instantly acquiring another cryptoasset. A transfer between your own wallets does not constitute a disposal.

If my purpose for acquiring a cryptoasset changes from my initial intention at a later point in time, will I still be taxed?

The IRD looks at your purpose at the time you acquire your cryptoassets. It does not matter if your intentions change at some other point in time.

If I sell my cryptoassets for lower than I bought it for, am I entitled to a tax refund?

Assuming you purchased the assets with an intention of future disposal, you are taxed on the difference between the amount you sold the cryptoassets for and the original cost you bought it for, overall being the net gain or loss that you make on that asset. If your original cost is greater than what you sell it for, you may be entitled to a tax refund.

If I am trading cryptoassets, am I deemed to be in business?

You are deemed to be in business if you are a trader based on factors such as:

  • Frequency/volume of transactions
  • Time and effort expended
  • Whether a systematic approach is applied
  • Amounts invested/traded

You may not be in business but may be in a profit-making scheme, being:

  • There is a present plan of action
  • That plan of action is to make profit

In this case, you will still be required to pay tax on your profits.

I haven't sold any of my cryptoassets, do I have any tax obligations?

In the case of standard cryptoassets you will not have any tax obligations as you are only taxed on realised gains. You may have tax to pay if you dispose of these cryptoassets in the future.

Looking for more information?

We can help crypto-investors to ensure their tax obligations are met. Simply contact your Baker Tilly adviser and we'll put you in touch with the right person on our team.

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