A tax loophole which reduces Bitcoin investors’ gains to zero will be exploited by people filling in their returns for this tax year, potentially creating millions in lost revenue for the Government, experts have warned.
HMRC is expecting to see a surge in the number of taxpayers declaring gains from cryptocurrencies this year after many investors sold their holdings after values soared, leaving them with huge profits.
However the taxman’s anticipated windfall could be far less than expected thanks to a loophole which lets taxpayers class their investment in cryptocurrency as “gambling”, winnings from which are tax-free.
An HMRC spokesman said: “We don’t normally tax betting and gambling because it is usually not classed as trading income. But there may be circumstances where factors such as the degree of skill and organisation would make the activity more likely to be taxable as trading…