A taxing time for digital assets
The decentralised and seemingly-unregulated world of cryptocurrencies and digital assets can give the impression that rules don’t really apply – but that is not the case.
TheBusinessDesk.com and Alexander & Co hosted a webinar to educate businesses on what they need to know when entering the world of tokens and NFTs.
John McCaffery, partner and head of tax at Alexander & Co, said that much of his firm’s work in the last 12 months has been education around tax, finding that a lot of people were unaware that movements and disposals and changes and various cryptocurrencies gave rise to a tax charge.
“There are still people out there who are not familiar with the facts or the needs for taxation around crypto,” he said. “We’ve spent a lot of time putting people right on that and bringing people up to date in terms of tax.”
McCaffery added: “If you’re going to engage crypto as part of your business, you need to be prepared that there’s a tax consequence to that.
“Are you trading? Is it an investment? Is it a discount? Is it a ticket? You need to sort all that out at the same time as part of your overall strategy because there is a tax cost.”
On the legal side, Jemma Fleetwood, a technology specialist in JMW’s commercial litigation team, said: “It’s quite fast-evolving, so what I say today might be different in a year’s time.
“There are lots of consultation papers with the Law Commission at the moment to bring out new legislation, they’re looking at regulating cryptocurrency.
“It’s important to keep in touch with your lawyers. If you’re going to go and advertise yourself as a crypto company, make sure you are being careful of how you advertise yourself. Get advice on that as the FCA is all over that at the moment.
“Make sure you’re creating new commercial contracts which factor in all the nuances of cryptocurrency and NFTs. We’ve seen recently with IP disputes that a lot of them are based on pre-existing licensing agreements that don’t factor in NFTs and digital products. So make sure you’re getting these reviewed by your lawyers.”