Topic: Tax situation with Bitcoin possible loop hole in UK (Read 622 times)

I'm curious to find out if anybody in the UK has thought about this process or indeed has tried it. If there is anybody clued up on taxation laws or has accounting experience to shed some light on this that would be much appreciated.

Basically the idea is that, it is now possible to purchase precious metals with Bitcoin. There are many services available that a Google search will find. The reason this is beneficial to do is Gold Bullion coins struck by the Royal Mint are CGT (capital gains tax) exempt in the UK as they are legal tender.

http://articles.royalmintbullion.com/gold-and-capital-gains-tax/

Typically when an asset is sold you would deduct the initial cost of the asset from the profit and calculate the tax from the remaining balance if there is a remaining balance. For example; if you acquire 10 BTC at £200 per coin and the price goes up to £2000 per coin then you would deduct the initial £2000 from the new figure of £20000. Then with the remaining £18000 you'd deduct your allowance and the tax would be due on the remaining balance at the tax rate that applies 18/28% respectively.

GBP > BTC [profit] > GBP [pay CGT]

If however in this scenario you purchased CGT exempt gold with your bitcoin(s) and sold them then no tax would be due.

GBP > BTC [profit] > Gold > GBP

In exchanging BTC for Gold you're not 'selling' your Bitcoin you are exchanging one asset for another asset of equal value.

Let me know what you guys think. Has anybody tried this, or considered this scenario?