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May 13th 2021

Cryptoassets: Stamp Taxes

Stamp Duty or Stamp Duty Reserve Tax is usually charged when you buy shares and some other securities from someone else. Stamp Duty Reserve Tax applies to electronic transactions settled through the CREST system; Stamp Duty applies to paper-based transactions. The rate in both cases is 0.5% of the “chargeable consideration” paid.

Does the purchase of exchange tokens fall within the rules? HMRC has said this is considered “on a case by case basis”, but that generally tokens would not meet the definition of “stock or marketable securities” (which are subject to Stamp Duty) or “chargeable securities” (which are subject to Stamp Duty Reserve Tax). Therefore, if you buy tokens you would not normally be charged Stamp Duty or Stamp Duty Reserve Tax.

What about if you use exchange tokens as consideration to buy ordinary shares or other securities? Here the rules diverge and it depends whether the transaction would be subject to Stamp Duty or Stamp Duty Reserve Tax regime, because each system defines “chargeable consideration” differently. Stamp Duty would not be charged, because tokens don’t meet the definition of “money” for Stamp Duty consideration purposes; but Stamp Duty Reserve Tax would be charged, because tokens meet the definition of “money or money’s worth” for Stamp Duty Reserve Tax consideration purposes.

Stamp Duty Land Tax is payable when you buy land and buildings over a certain price in England or Northern Ireland (Scotland and Wales have their own versions nowadays). It is calculated based on the chargeable consideration you pay to the seller. Chargeable consideration, for Stamp Duty Land Tax purposes, includes anything given to the seller that is “money or money’s worth”. Exchange tokens transferred to the seller represent “money or money’s worth” and therefore would be subject to Stamp Duty Land Tax. The tokens would need to be valued at their market value on the effective date of the transaction.

The Scottish and Welsh equivalent regimes (respectively, Land & Buildings Transaction Tax and Land Transaction Tax) use very similar definitions of chargeable consideration and the same principles are understood to apply.

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