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The UK's digital services tax is targeting cryptocurrency exchanges

The UK’s digital services tax is targeting cryptocurrency exchanges

Crypto exchanges in the United Kingdom will face a 2% UK’s digital services tax, which would most likely be passed on to investors, according to CryptoUK.

The UK's digital services tax is targeting cryptocurrency exchanges

The UK’s digital services tax will be imposed on cryptocurrency exchanges operating in the United Kingdom, according to a recent modification to Her Majesty’s Revenue and Customs (HMRC) laws.

According to a report, cryptocurrency exchanges in the United Kingdom will now be subject to a 2% UK’s digital services tax. Because digital assets are not considered financial instruments by HMRC, the British tax authority, exchanges are not eligible for financial exemptions.

On November 28, the authority included crypto exchanges in the Treasury’s tech tax. The income tax on digital services, which targets social media and search companies such as Facebook and Google, went into effect in April 2020.

The newest knock to crypto exchanges, as per the regulation, is related to the HMRC’s classification of crypto assets:

There are a wide variety of crypto assets, each with different characteristics. It said that because cryptocurrencies do not represent commodities, financial contracts, or money, it is unlikely that crypto-asset exchanges can benefit from the exemption for online financial marketplaces.

According to CryptoUK, the trade association representing the UK’s digital asset market, the fee is unreasonable and will almost certainly be passed on to investors and dealers.

The Executive Director Ian Taylor said that addressing cryptos differently than other financial instruments such as equities or commodities is counterproductive to the crypto sector. He further said that after the Financial Conduct Authority’s (FCA) strict licensing procedure for exchanges, it is yet another setback for the company.

Since January, all crypto-asset companies based in the United Kingdom have required to comply with AML (anti-money laundering) legislation and register with the Financial Conduct Authority (FCA).

The FCA outlawed crypto derivatives in January, and in June, it published a consumer alert on 111 crypto firms that had yet to register with it.

HMRC increased its attempts to catch crypto tax evaders in April and added explicit demands on details of digital asset ownership on self-assessment forms.

The British tax authorities apparently ordered that a number of crypto asset exchanges submit them information on their customers’ transactions and holdings in August of this year.

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