Her Majesty’s Revenue and Customs (HMRC), UK’s tax authority, has decided to withdraw plans to levy 20% value-added tax (VAT) on bitcoin transactions.
HMRC said: "As an EU tax, the VAT treatment for cryptocurrencies adopted by the UK must be consistent with any treatment that may eventually be implemented across the EU."
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Additionally, HMRC said that it would not levy tax on margins of the virtual payment method. It also said that crypto-currencies will be treated in the same way as other currencies.
However, VAT will be due in cases from suppliers of any goods or services sold in exchange for Bitcoin or other similar cryptocurrency.
HMRC also said that activities involving Bitcoin and other similar cryptocurrencies will be subject to Corporation Tax, Income Tax or Capital Gains Tax based on the activities and the parties involved.
The move comes at a time when the currency’s Tokyo-based exchange, Mt Gox, collapsed after losing several thousands of dollars of customer deposits to hackers.
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