Crypto exchanges in the United Kingdom will face a 2% tax, which would most likely be passed on to investors, according to CryptoUK.
A digital services tax will be paid 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 Telegraph article, cryptocurrency exchanges in the United Kingdom will now be subject to a 2% digital services tax. HMRC, the British tax authorities, does not consider digital assets to be financial instruments, hence exchanges are not eligible for financial exemptions.
The authority added cryptocurrency exchanges to the Treasury’s tech tax on Nov. 28. The digital services tax on revenue, which targets social media and search companies like Facebook and Google, was implemented in April 2020.
As the regulator noted, the latest blow to crypto exchanges is due to the HMRC’s categorisation 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.”
The levy, according to CryptoUK, the trade organisation that represents the UK’s digital asset market, is unjust and will most likely be passed on to investors and dealers.
Treating cryptocurrencies differently than other financial items such as stocks or commodities, according to Executive Director Ian Taylor, is detrimental to the crypto sector.
He went on to say that it is another setback for the business, following the Financial Conduct Authority’s (FCA) rigorous licensing procedure for exchanges.
Since January, all crypto-asset companies based in the United Kingdom have been required to comply with AML (anti-money laundering) legislation and register with the Financial Conduct Authority (FCA).
In August 2019, the British tax authorities reportedly demanded that numerous crypto-asset exchanges send them information on consumers’ transactions and holdings.