Crypto Currency Trading as a Business

It looks like Crypto is here to stay and some of you may already be using and dealing with it. We’d like to cover some essential points to help you be successful. Please contact us for any bespoke help and advice we can provide on your tax return.

Cryptocurrencies have several advantages over fiat currencies. They can be used to make cross-border payments without needing a third party, such as a bank or money transmitter. They can also be used to purchase goods and services online without needing a credit card or other traditional form of payment. And because they are decentralized, cryptocurrencies are immune to government interference or manipulation.

There are several ways businesses can benefit from using cryptocurrency. For example, businesses can use cryptocurrency to pay for goods and services online without incurring fees from banks or other financial institutions. Cryptocurrency can also send money internationally without converting it into another currency first. And because cryptocurrency is not subject to government regulation, businesses can avoid costly compliance regulations.

Perhaps the most obvious way businesses can benefit from cryptocurrency is by accepting it as payment for goods and services. This allows businesses to tap into a global market of customers who may prefer to use cryptocurrency rather than fiat currency. In addition, businesses can avoid paying credit card processing fees when they accept cryptocurrency as payment.

Finally, businesses can also benefit from investing in cryptocurrency. While the price of cryptocurrencies is highly volatile and risky, there have been instances where investors have made large profits by investing early in promising projects. For example, those who invested in Bitcoin when it was first released in 2009 would have seen their investment increase by over 4 million percent if they held onto their coins until 2017. Similarly, those who invested early in Ethereum have seen their investment increase by over 13,000 percent since 2015.

While many risks are associated with investing in cryptocurrency, there is also the potential for high rewards. As such, businesses should consider carefully whether investing in cryptocurrency is right for them, given their individual circumstances and risk tolerance levels.

What are the key differences between using cryptocurrency for business transactions versus personal trading?

Cryptocurrencies have been gaining popularity over the last decade, with more businesses and individuals adopting them for various purposes. While there are many similarities between using cryptocurrency for business transactions and personal trading, some key differences should be considered.

One of the most significant differences is the level of regulation that applies to each. Businesses are subject to a much higher level of regulation than individuals regarding financial transactions, meaning they must take extra care to ensure compliance with the law. This includes ensuring that transactions are carried out in a manner that is transparent and traceable, which may not always be possible with personal trading.

Another difference is the amount of risk involved. Businesses must often take on more risk than individuals when conducting transactions, as they may be dealing with large sums of money or sensitive information. This means that businesses must be more careful when choosing which cryptocurrencies to use and ensure that they have adequate security measures to protect their assets.

Finally, the fees associated with business transactions are typically higher than those related to personal trades. This is because businesses must often pay for additional services such as compliance and security, which can drive up business costs. However, the benefits of using cryptocurrency-such as increased efficiency and security-often outweigh the costs for many businesses.

How should businesses account for cryptocurrency when it comes to taxes?

If you are receiving or paying for any goods / services for your business, we highly recommend that you do this via a separate account earmarked solely for this use. Doing so helps keep transactions of your gains / losses separate from your personal trading to make things easier regarding tax time.

In the United Kingdom, cryptocurrencies are not considered legal tender but are instead classed as ‘private money. This means that businesses can choose whether or not to accept them as payment for goods and services. However, those who take cryptocurrencies as payment must account for them in line with standard financial regulations.

When it comes to accounting for cryptocurrency transactions, businesses must ensure that they have an adequate system to record these. This system should include:

  • A unique identifier for each transaction (e.g., an invoice number)
  • The date of the transaction
  • The value of the transaction (in GBP)
  • The type of cryptocurrency that was used
  • The wallet address used to send or receive the cryptocurrency
  • Any applicable fees charged by the exchange or wallet provider

Businesses can comply with financial regulations by keeping accurate records of all cryptocurrency transactions. They will also be able to track their spending and income more efficiently, which can be helpful for tax purposes.

In the UK, businesses accounting for cryptocurrencies must do so in accordance with the Financial Conduct Authority’s (FCA) Money Laundering Regulations. In addition, businesses must ensure that their anti-money laundering (AML) and counter-terrorist financing (CTF) procedures are up to date.

HMRC has stated that cryptocurrencies are taxed as property rather than currency. This means that Capital Gains Tax (CGT) is payable on any gains from selling or disposing of cryptocurrencies. In addition, Income Tax and National Insurance contributions may also be due to crypto-related activity, such as mining or investing.

If you’re a business owner accounting for cryptocurrencies, keeping good records and seeking professional advice when needed is essential. HMRC has published guidance on how it intends to tax cryptocurrencies, but this is subject to change. So keeping up to date with the latest changes will help ensure you stay compliant with UK tax law.