On 30th March, HMRC published a Cryptoassets Manual, stating that the aim of the manual is to help people understand the tax implications that can arise from transactions involving cryptoassets. It is written for HMRC staff but may also assist taxpayers and their professional advisers in understanding HMRC’s interpretation of the law.
This follows and replaces HMRC’s policy papers, entitled Cryptoassets: tax for individuals and Cryptoassets: tax for businesses, which were first published in December 2018 and November 2019 respectively.
It states that ‘HMRC’s views may evolve further as the sector develops and HMRC may publish amended or supplementary guidance accordingly’.
In relation to the interaction with SEIS, EIS and VCT investments, there is a page specific to the Venture Capital Schemes. It states, that ‘the schemes do not include any cryptoasset-specific conditions, and HMRC’s approach is to review cryptoasset or distributed ledger technology cases in the same way as any other business.’ It points to the fact that a core condition of the schemes is that a company must be carrying on a ‘qualifying trade’; that is a trade that is conducted on a commercial basis with a view to the realisation of profits and which is not an excluded activity.
Given the range of activities that companies undertake involving cyrptoassets and distributed ledger technology, and the rapid pace at which the sector is evolving, the manual states that HMRC cannot provide detailed guidance on every situation. In relation to the advance assurance service, which is non-statutory, it states that ‘In some circumstances HMRC may decline to give an opinion in response to an advance assurance request because the factual uncertainty involved is too great. Such cases are rare. This is a general feature of the venture capital advance assurance service and is not specific to exchange tokens. However, given the rapid pace of development of the industry, HMRC expects that, early on, there will be a number of exchange tokens cases that fall into this category.’
At Philip Hare & Associates, we have assisted a number of businesses engaged in crypto activities obtain advance assurance and with compliance statement submissions. However, there are instances where HMRC has not given an opinion as to whether or not a company meets the requirements, due to uncertainty in the sector. We hope that the manual will assist in removing some of the uncertainty for both HMRC and the industry alike. We expect that HMRC will provide further updates as the position evolves in this rapidly changing space.
