Crypto exchanges in Britain will impose a 2% tax, which would most probably be moved on to investors, as per CryptoUK.
A digital services tax will be imposed on cryptocurrency exchanges operating in the United Kingdom, as per a recent update to Her Majesty's Revenue and Customs (HMRC) regulations.
According to a Telegraph report, crypto exchanges in the United Kingdom will now be required to pay a 2% digital services tax. Since Britain's tax authority, HMRC does not consider digital assets as financial instruments, exchanges do not qualify for financial exemptions.
The authority added cryptocurrency exchanges to the Treasury's tech tax on Nov. 28. The digital services tax on income was implemented in April 2020, to target social media and search companies like Facebook and Google.
The latest setback for crypto exchanges is the outcome of the HMRC's classification of crypto assets, as described by the regulator:“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 tax, according to CryptoUK, the trade body portraying the digital asset sector in Britain, is unjustified and will most probably be passed on to investors and traders.
According to Executive Director Ian Taylor, handling cryptocurrencies differently than other financial instruments like equities or commodities is destructive to the crypto sector.
He noted that it is yet another significant blow to the sector following the Financial Conduct Authority's (FCA) rigorous licencing procedure for exchanges.
The FCA restricted crypto derivatives in January, and in June, it alerted users about 111 crypto companies that had yet to register with it.
HMRC stepped up its attempts to catch crypto tax avoiders in April, introducing clear demands on digital asset holdings data on self-assessment forms.
In August 2019, the Britain tax authorities allegedly asked that various crypto-asset exchanges send them details on clients from transactions and holdings.