The crypto deluge
Crypto. Airdrops. Blockchain. Metaverse. DApps. DeFi. TGEs. ERC-1155. SAFTs. Minting. Mining.
These terms are becoming ubiquitous as Web3 advances the concept of decentralization, in the form of a distributed ledger such as blockchain technologies, and token-based economics. The UK is currently home to 249 high-growth companies developing blockchain-driven software and blockchain services.
In the first quarter of 2021, Tesla added $1.5 billion worth of Bitcoin to its balance sheet. In the second quarter of 2021, Microstrategy added nearly $500 million of additional Bitcoin holdings.
With more companies investing in these technologies, more questions arise about their classification and treatment. With cryptocurrencies failing to meet the definition of a financial
asset, the question is, what type of asset are they? And what is the tax treatment of profits made from crypto activity? It is a common misconception among cryptocurrency investors that profits are tax-free. Despite there being no specific crypto tax legislation, profits are taxed differently in the UK based on a taxpayer’s actions and circumstances.
Crypto asset accounting specialists at Square Mile have compiled this guide for companies and individuals who are making substantial gains from crypto investments, to be aware of tax obligations and to be clear on the most current regulations.