Her Majesty’s Revenue and Customs has announced that it will consider alternatives to the current 20% VAT on purchases of Bitcoin, which at the moment is considered more as a voucher than a virtual currency. One of the options, involves following the German approach, which would classify Bitcoin as private money and would so limit the VAT on transactions.
This move has been motivated by concerns from the government that its citizens could use the cryptocurrency for tax evasion and money laundering and to address concerns from the tax authorities who want to generate revenues from the use of the coin.
Bill Dodwell from Deloitte, said about the commercial use of cryptocurrencies, “Many large businesses will be put off from accepting virtual currencies such as Bitcoins given the fringe nature of the industry and lack of transparency. That’s not to say that a cryptocurrency will not succeed in the future. HMRC clarifying its tax treatment will give more certainty to participants in the market and over the transactions taking place. This may boost confidence in cryptocurrencies and lead to wider adoption”.