Tax advice: Bitcoin, scams and PAYE inspections

    Each month we review the emerging themes from the calls to our tax advice lines. Below is a short summary of the key points our team has been discussing with accountants in January.

    Bitcoin

    The rapid rise in the value of Bitcoin has been in the news recently, with investors reminded to account for any gains (or losses) on their self-assessment tax returns.

    Whilst some investors have held out hope that trading in Bitcoin is the equivalent of gambling because of the speculative element involved and, therefore, profits are not taxable as ‘winnings’, some tax advisers have speculated whether sufficiently frequent trading of Bitcoin amounts to a trade and a liability to income tax.

    HMRC has been largely quiet about cryptocurrencies. The last technical briefing was published back in March 2014 which stated determining whether any profit or gain is chargeable, or any loss is allowable, will be looked at on a case-by-case basis taking into account the specific facts.

    Stripe, the US based firm which helps more than 100,000 businesses do financial transactions online, is to scrap support for Bitcoin payments citing rising transaction fees and price volatility as reasons for the exit. It said Bitcoin users now saw the virtual currency as an asset to be traded, rather than something with which to make payments.

    The government has raised separate concerns about cryptocurrencies being used to facilitate money laundering and tax evasion. 

    Last November, the then Economic Secretary to the Treasury, Stephen Barclay, stated:

    ‘The UK government is currently negotiating amendments to the fourth Anti-Money Laundering Directive that will bring virtual currency platforms and custodian wallet providers into Anti-Money Laundering and Counter-Terrorist Financing regulation, which will result in these firms’ activities being overseen by national competent authorities for these areas. The government supports the intention behind these amendments. We expect these negotiations to conclude at EU level in late 2017/early 2018.’

    It remains to be seen whether the forthcoming regulation actually helps cryptocurrencies gain trust and certainty or if the bubble has burst.

    Scams

    HMRC is reminding taxpayers to be especially vigilant about scam text messages promising refunds ahead of the self-assessment filing deadline. The messages usually include links to websites which harvest personal information or spread malware.

    According to HMRC, people are nine times more likely to fall for text message scams than other forms of communication like emails because they can appear more legitimate, with many texts displaying ‘HMRC’ as the sender.

    HMRC’s Director of Customer Services, Angela MacDonald said:

    ‘HMRC is focused on becoming the most digitally advanced tax authority in the world, and a big part of that relates to keeping our customers safe from online scammers. 

    As email and website scams become less effective, fraudsters are increasingly turning to text messages to con taxpayers.’

    PAYE inspections

    Generally PAYE inspections do not arise in respect of the actual payroll operation but more so in the treatment of expenses and benefits. One of the contentious issues is typically accommodation provided for employees.

    Accommodation is exempt and nothing has to be reported to HMRC if:

    • It is necessary or provided for the job. Agricultural workers living on farms is one example, or managers living above a pub.
    • It is provided to company directors who work for a non-profit organisation or charity and hold less than 5% of the shares.
    • It is required to protect an employee because there is a threat to their security.


    If the accommodation is not exempt, then a form P11D needs to be completed and Class 1A National Insurance paid on the value of the benefit.

    As well as the costs of the accommodation itself, costs which need to be included are:

    • council tax;
    • water and sewerage charges;
    • heating, lighting and cleaning;
    • repair, maintenance and decoration;
    • furniture for daily use; and
    • staff for upkeep of accommodation, such as gardeners and cleaners.


    To work out the standard value of living accommodation, these steps should be followed:

    1. use the greater of the ‘annual value’ or the rent paid
    2. if accommodation is provided for only part of the year, then it should be apportioned
    3. deduct any rent received from the employee
    4. if the accommodation is shared or only partly used for business purposes, then it should be apportioned

     

    For further information regarding any of these hot topics, or other tax and VAT advice, our helplines are available free of charge to our Fee Protection Insurance clients and can be accessed by calling 0345 223 2727.