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22 January 2020 0 Comments
Posted in Private Client, Technology & media

HMRC updated guidance on situs of crypto-assets

Author headshot image Posted by , Partner
Contributing authors: Mandy Casavant

About a decade or so ago, a new way of exchanging value was born. It would be generically termed “ cryptocurrency” and the first hatchling was called Bitcoin. is an Exchange token platform. We could look at it like the first sign of life crawling from a rock pool on earth. For several years it played all alone in the cryptocurrency sandbox. It lent itself well to non-mainstream users; it was geeky, rare, off the public radar. For this reason, it took a dark turn when linked to its use in the realms of black market and illegal transactions. But then it took an interesting turn back to glitz and glamour when people got wind of early investors became millionaires.

Before long, other cryptocurrencies appeared on the scene. Some of them took the idea beyond that of a simple digital currency and the term “token” sprang into existence to signify all the different things you could do besides simply buy and sell stuff. There are now Utility Tokens, Security Tokens, Currency Tokens, Reward Tokens, Asset Tokens and then some. Each one is different and operates in a unique way to the next.

HMRC are naturally interested in this world of cryptocurrency as it can be a source of Revenue for them.

HMRC updated their guidance, ‘Crypto-assets: tax for individuals’, on 20 December 2019 to include a section on the situs of crypto-assets. ‘Situs’ is a legal concept of where crypto-assets are deemed to be located for UK tax purposes. The update relates only to ‘exchange tokens’, namely crypto currency like Bitcoin which are distinguished from those others in the list above. So they are starting with just one form to see how this goes.


The HMRC guidance states that: ‘throughout the time an individual is UK resident the exchange tokens they hold as beneficial owner will be located in the UK.’ In other words, the situs will track the residence of the holder for the purposes of all UK taxes.

The remittance basis is an alternative tax treatment that’s available to individuals who are resident but not domiciled in the UK and have foreign income and gains. If you’re taxable on the remittance basis, you’re liable to UK tax in the normal way on your UK source income and gains. But you’re only liable to UK tax on any remittances (amounts) of foreign income and gains that you remit to the UK. Basically what you bring into the UK.

This is unhelpful to a person who is in the UK on a short-term basis. Such individuals, provided they are non-UK domiciled (‘non-dom’), can claim the remittance basis to shield their unremitted foreign income and gains from UK tax. The remittance basis applies to all types of asset, with some minor and logical exceptions (such as offshore bonds). The new guidance is effectively an attempt by HMRC to remove the right to claim the remittance basis on these specific type of crypto-assets.

HMRC’s Approach

HMRC have recognised that ‘exchange tokens are a new type of intangible asset’. But there are so many strains, variations and types. Crypto-assets can be held in a variety of different ways, which logically should have some impact on their situs. For instance, some investors hold ‘private keys’ (i.e. the passcode which is needed to access) in their personal possession, perhaps on a hard drive or on a piece of paper in a safe. So— location of the paper or the private key means its situs

What if you have stored your private key with a centralised exchange? Where is the wallet? That could be in the Czech Republic. Would this be where that exchange operates – its situs? Or where it was incorporated?

So, a non-dom dies here in England holding a private key. What happens for inheritance tax (‘IHT’)? HMRC want IHT to be paid on the crypto currency here in England.

Top Tip for non-doms? Do not remit all your crypto to your person when travelling, whether you plan to die or not!

If you have any questions about crypto assets, please contact us today.

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