Each country has its own systems for tax evaluation and collection, and some countries are stricter than others. One of the major issues governments have with cryptocurrencies is the difficulty in taxing profits made on trading. The United Kingdom’s HMRC (Her Majesty’s Revenue and Customs department) found this out the hard way.
Finance experts have warned that a loophole which reduces crypto gains to zero can be exploited on tax returns in the UK. It was reported that this could potentially deprive the government of millions in lost revenue.
HMRC will be expecting a large number of profit declarations on tax returns after the crypto market capacity soared by almost 2000% in the past year. However, the taxman could be seeing far less than anticipated due to a loophole which currently enables crypto profits to be declared as gambling winnings, which are not taxable.
A HMRC spokestperson said:
We don’t normally tax betting and gambling because it is usually not classed as trading income. But there may be circumstances where factors such as the degree of skill and organisation would make the activity more likely to be taxable as trading income. Each case will depend on its own facts.
Barrister Etienne Wong commented that the UK rules are expected to confuse amateur traders and investors as they are not clear on who should be considered as a gambler and who falls into the category of taxable investor…
Read Full: Tax Loophole Found for UK Crypto Profits