The United Kingdom has taken one step forward to becoming a cryptocurrency hub with its latest tax exemption for non-residents and foreign investors while purchasing digital assets through local investment managers or brokers.
The UK's Crypto Tax Break for Non-Residents
The new tax break rule came into effect on 1 January 2023 and is part of Prime Minister Rishi Sunak’s plans to make the United Kingdom a cryptocurrency hub.
The HM Revenue and Customs, which is the UK government’s tax arm, stated to the crypto-focused publication Coindesk that the tax exemptions are in the direction of attracting more global investors.
“To build upon the UK’s position as an investment management hub, this exemption has been extended to include crypto assets, so that funds which include them aren’t put off from appointing UK managers,” the HMRC stated in an email response to the crypto publication.
Check out the recent London Summit interview with UK MP Lisa Cameron on "Crypto Hub in the Making."
The UK’s Crypto Tax Guide
The United Kingdom does not have a specific crypto tax regime. Instead, the HMRC imposes existing income and capital gains tax rules on cryptocurrency trading and investment profits.
Though the HMRC has tracked cryptocurrency transactions since 2014, it can only do so for centralized crypto exchange venues. Trades executed on decentralized platforms cannot be tracked. However, the tax arm is now consulting with investors and professionals to find ways to tax transactions on decentralized finance platforms.
Meanwhile, the Financial Conduct Authority (FCA ) has the jurisdiction to oversee crypto startups and businesses, including exchanges, operating in the United Kingdom. It has mandated the registration of all cryptocurrency businesses operating in the country. However, the process was slow due to the impact of the pandemic on regulatory operations, and dozens of crypto companies are still in the pipeline to receive authorization.
Meanwhile, the UK parliament is debating on a Financial Sevices and Markets Bill, and if passed, it will provide more comprehensive control of local regulators over cryptocurrency operations. Furthermore, the UK Treasury is expected to open a consultation on cryptocurrency regulations.
