UK companies and crypto: intangible assets, gains or trading income
A UK company's crypto may be taxed under the intangibles regime, as chargeable gains or as trading profit. Accounts and facts decide.
If a UK company holds crypto, its tax treatment is not fixed. Depending on how the accounts treat the tokens and what the company does with them, gains and losses may follow the accounts under the intangible fixed assets rules, fall into Corporation Tax on chargeable gains, or form part of trading profits. Getting the route wrong changes both timing and amount.
Not money, so not a loan relationship
HMRC's view is that no current cryptoasset is money or currency [1]. That takes the foreign exchange rules for currencies off the table [1]. It also means that buying exchange tokens does not create a loan relationship, and lending them, as opposed to lending money, is unlikely to be one either [2]. The loan relationship rules do still apply to a money debt secured on crypto collateral, whether the company is borrower or lender [2].
Route 1: intangible fixed assets
Tokens fall within the intangible fixed assets regime in Part 8 of the Corporation Tax Act 2009 if two conditions are met: they are an intangible asset for accounting purposes, and they are an intangible fixed asset, meaning acquired or created for continuing use rather than simply held [3]. Financial assets and certain other categories are excluded [3].
When the regime applies, it takes priority over other corporation tax rules, including chargeable gains [3]. Tax then follows the accounts: credits and debits recognised in the accounts, including impairment, are taxable or deductible [3]. Under a cost model, an impairment booked at year-end can therefore produce a tax deduction in the same period.
The continuing use test is the judgment call. A token used in the business over time is a stronger candidate than one held as a store of value, and HMRC does not give a bright line. Document the purpose when the tokens are acquired.
| Account | Debit | Credit |
|---|---|---|
| Year-end impairment of tokens carried at cost Cost 50,000 pounds; recoverable amount at year-end 40,000 pounds | ||
| Impairment loss — digital assets | 10,000.00 | |
| Accumulated impairment — digital assets | 10,000.00 | |
Route 2: chargeable gains
Where activity is not a trade and the tokens are not within the loan relationship or intangibles rules, disposals are taxed as chargeable gains [1]. A disposal includes selling tokens, swapping them for different tokens, using them to pay for goods or services, and giving them away; moving tokens between the company's own wallets is not a disposal [5].
Company matching rules differ from those for individuals. Each token type has its own Section 104 pool, but a same-day acquisition is matched first, and a disposal is then matched with acquisitions in the previous nine days on a first in, first out basis before the pool is used [6]. Individuals instead look forward 30 days. Gains are charged at the company's corporation tax rate, currently 25 percent main rate and 19 percent for profits of 50,000 pounds or less, with marginal relief in between [8].
Route 3: trading
If buying and selling tokens amounts to a trade, profits and losses form part of trading profits rather than chargeable gains [4]. HMRC looks at frequency, organisation and intention, and says it expects it to be exceptional for a business to trade exchange tokens with enough frequency and sophistication to be a financial trade [4]. Calling yourself a trader is not enough [4].
Sterling, GAAP and records
Taxable profits must be computed in pounds sterling. Where a transaction involves no sterling, such as bitcoin for ether, you need an appropriate exchange rate at the time of each transaction, a consistent method and records of that method [7]. Trading profits follow GAAP, and a company may have a non-sterling functional currency provided it translates appropriately and files in sterling [7].
| Route | When it applies | Timing |
|---|---|---|
| Intangible fixed assets | Intangible in the accounts and held for continuing use | Follows the accounts, including impairment |
| Chargeable gains | Default for non-trading holdings outside the other regimes | On disposal, using company matching rules |
| Trading profits | Activity amounts to a trade (rare, per HMRC) | As part of trading results |
What to do
- Confirm how the tokens are classified in the statutory accounts, since the intangibles route depends on it.
- Record the business purpose of each holding at acquisition to support or rule out continuing use.
- If gains apply, run the same-day and nine-day matching before the Section 104 pool for each token.
- Set a written sterling conversion policy covering sources, timing and crypto-to-crypto trades.
- Take advice where the position is borderline; HMRC decides each case on its facts.
Sources
- CRYPTO41050 - Cryptoassets for businesses: Corporation Tax: introduction (HMRC)
- CRYPTO41100 - Cryptoassets for businesses: Corporation Tax: loan relationships (HMRC)
- CRYPTO41150 - Cryptoassets for businesses: Corporation Tax: intangible fixed assets (HMRC)
- CRYPTO40150 - Cryptoassets for businesses: buying and selling exchange tokens (HMRC)
- CRYPTO41250 - Cryptoassets for businesses: Corporation Tax on chargeable gains: what constitutes a disposal (HMRC)
- CRYPTO41350 - Cryptoassets for businesses: Corporation Tax on chargeable gains: pooling (HMRC)
- CRYPTO40100 - Cryptoassets for businesses: accounting and conversion to pound sterling (HMRC)
- Corporation Tax rates and allowances (GOV.UK)
General information for finance teams, current as of publication. Not legal, tax or accounting advice.