A select few employers pay their employees in crypto - it's known as "crypto compensation". GMO Internet, a Japanese company, was one of the first to do so back in 2017, when it offered its employees a combination of cash and crypto.
Whilst it's not exactly widespread, no doubt we can expect to see crypto compensation become a more common feature of employment packages in future - including here in the UK.
I'm not going to comment on all the legal ins and outs of this - that's not my field at all - but specifically on the tax aspects. And although crypto compensation is still quite rare, HMRC obviously sees that it's going to become more widespread, because their cryptoassets manual does address the question of how crypto compensation may be taxed.
In fact, HMRC's position on this is quite clear: if an employee gets paid in crypto for their services as an employee, then the cryptoassets count as "money's worth" and are subject to Income Tax and National Insurance on the value of the assets.
Where the cryptoassets in question amount to "readily convertible assets", the employer has to account to HMRC for tax and NIC, based on the best estimate of the value of the asset. Tokens that are readily tradeable on exchanges (such as Bitcoin, Ethereum) at the point the employee receives them will be regarded as readily convertible assets for this purpose.
If/ when the employee subsequently disposes of the cryptoassets in question, any gain or loss (compared to the value of the tokens on which Income Tax was charged) is likely to be dealt with under the Capital Gains Tax regime.
If you require help with UK tax and your cryptoasset affairs, contact us today, or drop by our Edinburgh or Kirkwall office.