Fintech Awards 2018

9 purposes. Here the bitcoin is treated as disposed of, represented by the market value of the cryptocurrency received or goods or services acquired. This is intuitively more difficult to recognise. Where goods or services are acquired, it will be the market value in sterling of those goods or services that will provide the consideration for the disposal of the bitcoin and the calculation of the resulting gain. More difficult still is the disposal of bitcoin utilised in subscription of an ICO. Here the bitcoin have been exchanged for the cryptocurrency or tokens received to fund the subscription to the ICO. There has been a disposal of the bitcoin for a consideration, represented by the market value of the tokens/cryptocurrency received. As these are unlikely to have a sterling market value, the consideration taken for the disposal of the bitcoin will be the sterling market value of the bitcoin at the time of the transaction. This will also represent the acquisition cost of the tokens received for chargeable gains purposes. Individuals will be required to identify and report gains realised on their disposal of bitcoin into cash, kind or other digital currency with the result that taxable gains may arise in circumstances where no cash has been realised. There is currently no ability to “rollover” gains realised on the disposal of bitcoin on reinvestment into ICO’s, meaning that the identification and reporting will be a particular compliance burden for individuals. While the conceptual framework for the taxation of individuals transacting in bitcoin and other cryptocurrency is relatively clear, at least in HMRC’s view, the simple adoption of the “barter principle“ in bringing such transactions into charge to capital gains tax is far from simple in reporting and compliance terms. While further guidance is anticipated and some relaxation is to be hoped for (particularly in terms of some form of “rollover” for reinvestment in other cryptocurrencies) the expectation is that much of this will go to reinforcing the reporting and compliance message outlined, rather than some new approach specific to cryptocurrency.