The UK crypto exchanges will be charged a 2% tax that will likely be passed on to investors, CryptoUK warned.
A recent update to Her Majesty’s Treasury and Customs Authority (HMRC) regulations introduced a digital services tax that will apply to cryptocurrency exchanges operating in the UK.
UK crypto exchanges are now required to pay a 2% tax on digital services, according to a Telegraph report. The UK tax authority HMRC does not recognize digital assets as financial instruments and therefore exchanges are not eligible for financial exemptions.
On November 28, the agency began exchanging cryptocurrencies under the Treasury Department’s technology tax. Digital services income tax was introduced in April 2020 and is aimed at search engine and social media giants like Facebook and Google.
The latest hit for crypto exchanges is the result of the HMRC’s classification of crypto assets, as stated by the regulator:
“There are a variety of crypto assets, each with different properties. He said cryptocurrencies are not going to be commodities, financial contracts, or money, and crypto asset exchanges are unlikely to benefit from the exception for online financial markets. ”
According to CryptoUK, the business entity representing the digital asset sector in Britain, the tax is unfair and will likely be passed on to investors and traders.
Executive Director Ian Taylor has said that treating cryptocurrencies differently from other financial instruments such as stocks or commodities is detrimental to the cryptocurrency industry.
He added that this was another blow to the industry following the arduous licensing system introduced by the Financial Conduct Authority (FCA) for exchanges. As of January, all UK-based cryptocurrency companies must comply with AML (anti-money laundering) regulations and register with the FCA.
The regulator banned crypto derivatives in January, and in June the FCA warned consumers of 111 crypto companies that had yet to register.
In April, Cointelegraph reported that HMRC had stepped up its efforts to apprehend crypto tax evaders and put explicit demands on the details of digital asset holdings in self-assessment forms.
UK tax authorities allegedly requested that various crypto asset exchanges provide details of customers’ transactions and holdings in August 2019.
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