Further, it is highly unlikely that a cryptocurrency would constitute foreign currency certainly for the time being.
Someone who is buying and selling cryptoassets, again, is unlikely to be speculating or gambling (in a tax sense, anyway).
The default position is likely to be that a transaction involving the buying and selling of cryptoassets is of an investment nature.
However, this is a rebuttable presumption. The presumption might be rebutted where the activities are so organised that they fall to be classed as a venture in the nature of trade.
For an individual, trustee, partner of a partnership or member of an LLP, where one’s activities are considered investment, any profits or losses on disposals will fall within the CGT regime.
In terms of whether a person has crossed the line into a trade, we first look at the badges of trade.
These will be familiar to many accountants, tax advisers and lawyers. The term is simply used to describe a number of factors that were scraped from existing case law by a Royal Commission in 1955.
Despite these factors being consolidated almost 70 years ago, they remain as valid as ever.
However, the badges are at best, merely indicative. One must consider the facts of a case and form a holistic view.
There is more information regarding the individual badges of trade on our website.
In terms of other case law, at this stage, there is no specific case law relating to whether cryptocurrency activities constitute a trade.
There is plenty of analogous case law that relates to whether transacting in shares (and other financial instruments) is an investment or a trading activity.
The recent cases of Akhtar Ali and Rajesh Gill are most instructive and provide helpful consideration of the existing, relevant case law.
In both cases, the “prima facie presumption … that he is not [trading]” was rebutted by the fact-finding tribunals.
Largely, this was due to the fact that both appellants in these cases operated by reference to a business plan (albeit unwritten in both cases). This gave their activities a “deliberate and organised” quality necessary for there to be a trade.
Whether you are just getting started or have been investing in cryptocurrency for several years, our tax specialists can provide bespoke advice to support you in achieving your objectives tax-efficiently. Please get in touch.
