Cryptocurrency exchanges must pay a 2% digital services tax in the UK, according to a report published by The Daily Telegraph on Sunday. Since HM Revenue and Customs (HMRC) does not recognize cryptocurrencies as “financial instruments”, they are not eligible for the exemption granted to financial markets. This means that the crypto industry in the UK is facing taxes.
Tax on local income of big tech companies was introduced in April 2020. But the crypto industry does not qualify for this exemption. CryptoUK, a crypto lobbying group, is dissatisfied with the absence of the exemption as it will further suffocate the industry. The UK arm of the Coinbase exchange is expected to easily cross the £25m ($33m) revenue threshold due to increased crypto trading in 2021.
HMRC Not Backing Down
However, HMRC is adamant that crypto assets cannot be classified as commodities or currencies. In October, European governments struck a deal with the United States to create a new global tax regime to avoid America’s retaliatory tariffs.