Topic: Uk - vat (Read 6794 times)

I think it means that if you're selling at face value, VAT is due when someone buys a good/service with their bitcoin (ie that vendor must account for VAT not you).  But because you have 10% markup over MtGox (arguably 'face value'), presumably you're due for VAT on that 10% markup.  Just my reading, DYOR of course.

btw, quick beer-mat calculations - with VAT threshold at 79k, let's say at 60k you started worrying about VAT...2.5% means trade volume of £2.4m, 3.5% means £1.7m. So have you traded somewhere in between, approx ~£2m of bitcoin in a month, or are my figures out of whack?

Sounds pretty straight-forward to me: Like FinCEN in the US, HMRC in the UK seems to want to stick to "real" money and "real" goods. Hence they only care about the moment when bitcoins get exchanged for fiat currency. Or, in the case of HMRC, also when bitcoin take the place of fiat currency, i.e. when goods with a fiat price tag change hands for bitcoin, rather than for fiat.

This may be slightly unwelcome news for the person starting this thread. If I understand correctly, his business is selling something ordinarily considered to have a fiat price tag for bitcoin. There's a good chance that would be seen as using bitcoin in the way a voucher or bill of fiat money is used, and that seems to indicate that at the moment of sale VAT may be charged (but only, of course, if VAT would be charged had the payment been in sterling rather than bitcoin).

Disclaimer: I'm neither familiar with legal matters nor how these things are handled in the US or the UK. So there's a good chance I simply don't see the problem everyone else is instinctively aware of.

Just googled it out of curiosity

http://www.hmrc.gov.uk/vat/managing/charging/discounts-etc.htm#4


Neither of those make any sense with respect to bitcoin if you ask me. Still none the wiser.

Just received a letter from Hmrc as to the uk policy regarding Bitcoin - they consider it a "cyber currency" and  is the same vat regime as a "voucher" haven't had time to look into it yet .

as Mjbmonetarymetals says


its out the scope of HMRC at the moment.

they have to investigate it more. EG is bitcoin a raw material to be used later to create a secondary product, has anything VAT inclusive been added to create bitcoin to increase its value as the new product called bitcoin. and alot of other "VALUE ADDED" tests

bitcoin itself has a value yes, but it has not been a previous product where its current form is a value added version of something before.

the only time bitcoin would be VAT inclusive is if the bitcoin was part of something. EG (great example)

casasius coins.

when a shop heats up a pasty or a ready meal for you. the meal is then VAT full rate due to the service of heating it, adding value to the raw materials. yet frozen/fresh veg, etc are VAT free.

i cant see bitcoin as being a value added product going by their tests. so while at the moment its out of scope. i believe in the future it will be vat exempt. (except physical bitcoins)

Thanks for the info, could I have your accountants number  , my accountant refers to bitcoins as "bits" he just said Hmrc must have a policy on Bitcoin just got this email below today, I'm confused about this fixed rate that can be negotiated any large percent makes it impossible to make any profit. 


Subject - Bitcoins
 
Thank you for your enquiry of 24 February 2013, regarding the VAT liability of a bitcoin.
 
Unfortunately I am unable to offer any advice regarding this matter at this moment. We are currently awaiting advice from the Policy group regarding this. As soon as we have any further information I will give a full and proper reply.
 
If you have any further queries regarding this matter, please submit your enquiry via our website, ensuring that you quote the case reference number at the top of this reply. Enquiries can be submitted by following the appropriate links on the VAT 'Contact us' page at www.hmrc.gov.uk

PIUK

so what is HMRC's OFFICIAL verdict?

Oops made a mistake with the VAT number. The correct one is up now.

The HRMC has not indicated to us that they consider bitcoin to be outside the scope of VAT. You should be able to get your accountant to negotiate a fixed rate.

In addition to AML watch out for stolen bank accounts, If UK banks receive a complaint they will reverse the transaction.

good going. the making a report of a suspicious transactions is done by using the UK's crime devision known as SOCA http://www.soca.gov.uk/
on the top right it has the link to SARS https://www.ukciu.gov.uk/(jktpc345lxt4gxzeqwcwrkrj)/saronline.aspx. sign up to it. look at the templates of the form to fill out to know what to look out for, and in short what to prevent happening to ever be in a sticky situation.

the whole FSA thing is that if you show that you have limits set to reduce the chances of laundering. and stay within the confines of different laws and show that you hold logs of any identifying characteristic's securely, and have a process set up to deal with large amounts or blatantly obvious proceeds of crime.. and all that blah. this is about making your own guidelines ("handbook") they are happy. this alone if done right would prevent the headache / possibilty of ever needing to do a sars report.

the main thing for the UK is the monetary limit, there are many limits for different reasons. tax, imports, AML, etc etc. which the lowest limit for UK is actually the european wire transfer regulations. of 1000 euro (about £850 give or take exchange rate) for maximum wire transfer amount or multiple amounts in a short period what can EASILY be deemed to be linked.(basically daily) with an upper 15,000 euro (roughly £12k) a year limit.
so having a very maximum of £850/day(£12k a year) but then set an safe buffer of lets say £500/day(£8k/year) ensures you don't have to really ever go into the complexities of grabbing customers whole biological history. if someone does send you the amount over the limit request all the info before allowing the transaction to complete or refund. just giving a refund without taking info/freezing accounts can be deemed as laundering if the funds were indeed part of a crime. so set strict limits and make it impossible to offer more then the limits without ID.
if they send funds without your consent then thats their fault for then getting into a situation requiring ID.

you will need to keep logs of account details and receiving bitcoin addresses and have a way to sort it so that it flags up if a single address receives or gives a larger then limit amount. also ip addresses help with this.
(the downside of ip addresses is if 1000 people are using tor, it may pick up that the limit gets flagged often) so to stay within the rules and keep good practice guidelines it might be best to just ban known Tor IP's.

when it comes to regulations governments dont care much about bitcoin. what they do care about is how much UK  pound sterling you are giving people/taking from them. so if anyone complains that their large transaction requires an ID and that crypto is supposedly anonymous, simply tell them that fiat isnt anonymous, so if they want fiat, they cant be anonymous. if they aint happy they can always trade bitcoins for litecoins lol. requesting/giving fiat is not an anonymous transaction.

the other main thing is if someone has sent a large amount (hopefully you have limits/processes to prevent this) and it does seem 'dodgy' where they have blatantly told you its proceeds of crime. you cannot tell them its being investigated or simply give them a refund no questions asked.

hense why bitinstant dwolla/mtgox just have the statement of "frozen funds"

some of this is bad customer service. but if you prevent yourself from getting into the sticky situations by setting limits and describing why the limits are there carefully. then you should never get into those sticky situations.

now a small test.

1)you receive 5 requests for bitcoin. 5 different bank accounts for £500 each but all going to the same bitcoin address in one day. what do you do (totalling £2500)
2)you recieve 100 requests for pound sterling £500 from multiple bitcoin addresses going to one bank account over the course of a year (totalling £50,000) what do you do.

answers
1)when users input the receiving bitcoin address before the transaction begins(before you inform them of your deposit bank account details), it is checked that the address has not received £500 in a short period (daily). and message the customer before the transaction begins. this address has reached its limit. (dont inform them how to get around it).
2)after a few weeks of doing nice little £500 to the bank with reasonable time gaps between it finally gets to your limit of £12k(or whatever lower limit you prefer) for that particular customers bank account. inform them before the money transaction begins that the bank account is at its limit

in both cases inform them if they wish to proceed identification will be required.(or preferably to avoid 'possible' headache you say "sorry transaction cannot be allowed")

so have the system in place if they want fiat, you request their bank sortcode -account number first. (check it against history) before showing them a deposit bitcoin address/ warning message
so have the system in place if they want bitcoin, you request their bitcoin address AND the bank account-sortcode they will use first. (check it against history) before showing them a deposit bitcoin address/ warning message.

this is why blockchain.info asks for your bank details when you buy bitcoins and not just the bitcoin address to receive the coins on.

preventing a sticky situation is much preferable then getting involved in one.

I received the green light from Barclays bank, Hmrc aml division - who also contacted Hmrc policy department who said they have no specific policy regarding Bitcoin being either a currency or e-money the main advice was to read the proceeds of crime act and report any suspicious transactions, I've taken advice from an accountant I would be interested in the exact nature of the surprises I should expect from Hmrc?

It would be premature to say that characterizing bitcoin as currency is flawed. I think a more accurate label would be undefined. As bitcoin users and advocates, I believe it is crucial to agree on terminology so that when it does go before governmental courts for true definition that we are in place to lobby and voice our position. In my mind the label of currency best describes what bitcoin is and strives to be. I am open to other interpretations though. I am gathering the various interpretations and their associated qualities and arguments, which ill post over at btclag.org

the first 3 words explains why treating bitcoin as currency is flawed.

it is not about what 'one' considers. its what the government department considers it to be. so ASK THEM directly.

If one considers Bitcoin a foreign currency  (which seems like a fair label to me)

Securities and foreign currency trading businesses do not have to pay value added tax (VAT), the Ministry of Finance (MoF) has issued circular guiding implementation of Decree No.121/2011/NÐ-CP on VAT.

Land use right transfer, securities trading, foreign currency trading, teaching, vocational training, specialised press release, personal gifts do not suffer the VAT, the circular said.

Contacting them and/or your accountant should be something you've done before you started a Bitcoin business. Otherwise, you'll just be in for a lot of surprises.

This isn't an issue where I'm trying to prove anyone wrong I sure hope your correct i should have contacted Hmrc a few months ago, I'm waiting on a reply from them.

i never said zero rated as that is a HMRC category... here ill lay i out for you

zero rated VAT
is a category for specific items
VAT exempt
is a category for specific items
reduced rate VAT
is a category for specific items
full VAT
is a category for specific items

now google "outside the scope of VAT"
ill save you time
http://www.hmrc.gov.uk/vat/forms-rates/rates/rates.htm#5
ill highlight another HMRC quote


its not a simple question of do you do over £77k income. that simply puts you into the BUSINESS category where you need to register with companies house and HMRC in relation to self employment/corporation status. not VAT

Now then contact HMRC and ask them if bitcoins are INSIDE the scope of VAT, and if so which category, and why. u will be surprised by their reply...

then ask bitpay, walletbit, bitinstant, blockchain.info(UK based by the way) why they are all government registered companies(companies house and foreign versions of such) yet they are not registered for sales tax/VAT.

the key word "outside the scope of VAT"

P.S
and if your just going to look at blockchain.info and see a VAT number..and try replying back thinking you have proved me wrong without further research. Then please go check it out
TQ at the start go on... oh wait its not valid.. lol its not a VAT number for any country. (its his way of saying "i look official by saying this random stuff starting TQ ..but i cant be VAT registered') VAT numbers are pure numerical.

After a disccussion an AML issue in December with HMRC Anti Money Laundering Supervision - they sought advice from hmrc policy team regarding bitcoins status they confirmed that at that time (late December 2012) they did not consider Bitcoin as either a currency or emoney.

We can call a Bitcoin anything but if there hasn't been a special policy put in place regarding bitcoins status how do you come to the conclusion it's zero VAT status ?.

Have you contacted HMRC ?, I need to ramp down all trades this week in order to keep under £77k. 3-4 months trading after April I could find myself in the same position again.

VAT is only applicable to certain items. bitcoin isnt one of them. so you dont have to worry about selling 1 or a million of them in regards to VAT,, just be careful keeping records for corporation tax/income tax.

(uk) I take it a UK exchange wouldn't be  "buying or selling" btc but bringing together both buyers and sellers.

If the exchange collects customers funds used to buy btc how does the exchange account for that money they receive, isn't it automatically viewed as "turnover" ?

The Question basically is what is vat applied to (when over the £77,000 threshold) as either an automated exchange or a manual buyer, seller of Bitcoin?

As I see it anyone buying and selling Bitcoin here in the uk needs to remain under the vat threshold, clearly Bitcoin+vat won't work. Does an exchange function so that only the fee is subject to vat?.

Hmrc have no policy regarding Bitcoin as a "currency" only at that point is it possible to trade without vat, operating more like a currency exchange or money service.