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Background:

I have programmed my own service using https://bitcore.io and I have a limited company set up in the Uk! My company's original intention was to deal with Paypal transactions. (but we are now going to only use Bitcoin!)

We plan to only accept BTC ,only pay and make trades in BTC (never converting money within the company to pounds or any other fiat currency).

Additionally I am recording every transaction and payment in my database - for the record and in case the tax man would need to take a look at what is going on.

To put it very simply; my company has two instances of dealing with Bitcoin:

  1. A user buys my product with Bitcoin and I collect it in my own private key
  2. A user requests a payment from me. I pay them in bitcoin to a public address of their choice using another private key of mine

My question is:

If my company is never dealing with any fiat money; what information should I be sending to the tax man?

It is a registered company after all (dealing with international clients) and I want to comply with the law.

What are my tax obligations?

From https://www.gov.uk/government/publications/revenue-and-customs-brief-9-2014-bitcoin-and-other-cryptocurrencies/revenue-and-customs-brief-9-2014-bitcoin-and-other-cryptocurrencies

  • when Bitcoin is exchanged for Sterling or for foreign currencies, such as Euros or Dollars, no VAT will be due on the value of the Bitcoins themselves
  • charges (in whatever form) made over and above the value of the Bitcoin for arranging or carrying out any transactions in Bitcoin will be exempt from VAT under Article 135(1)(d) as outlined at 2 above

However, in all instances, VAT will be due in the normal way from suppliers of any goods or services sold in exchange for Bitcoin or other similar cryptocurrency. The value of the supply of goods or services on which VAT is due will be the sterling value of the cryptocurrency at the point the transaction takes place

So I am to say nothing?? O.o

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  • It depends on what your business is and what country you're in.
    – Nick ODell
    May 30, 2016 at 20:21
  • digital goods based in the uk
    – Ben Muircroft
    May 30, 2016 at 20:30
  • Last paragraph seems to make it pretty clear: when you sell an item for, say, BTC 2.5, you determine the market value of BTC 2.5 in GBP at that moment, and you owe VAT on that amount.
    – Nate Eldredge
    May 31, 2016 at 0:30
  • I think stackexchange is a bad place for location specific professional financial/legal advice. Contact an accountant and/or a lawyer.
    – Pieter Wuille
    Jul 4, 2016 at 18:27
  • 1
    I depends on the type of digital goods, are these goods vouchers? Vouchers have no VAT!
    – Stefan
    Nov 2, 2016 at 9:42

1 Answer 1

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If you receive 500 EUR as a payment, how do you declare it?

Easy, you declare it as however much GBP it was at the time. If you receive it as a wire transfer your bank will even make this conversion for you!

So with BTC if you receive 2.5 BTC you have to see what the GBP value is and declare that as your receipts, and pay VAT and whatever other taxes on it.

Of course you can choose to lie to the tax man, but remember that Bitcoin is a lot easier for them to track than even your bank account, unless you are very good at operational security and you use something like Monero to separate your transactions. Obviously this is not worth it if you end up having to turn most of it into fiat to pay suppliers anyway.

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