United Kindom’s tax regulator invited crypto service providers to operate in its jurisdiction by announcing the inclusion of cryptocurrencies in a tax exemption program.
The Commissioners for His Majesty’s Revenue and Customs (HMRC) have published legislation defining “designated crypto assets” as qualifying for the investor management exemption (IME) in transactions made from 2022 to 2023.
The regulation, which takes effect on January 1, 2023, does not provide a positive definition of “designated crypto assets.” Instead, it refers to “investment transactions” as defined in the investment transactions regulations of 2014.
The UK uses IME as a tool to strengthen its status as a financial hub. It allows non-UK resident investors to appoint UK-based investment managers to conduct certain investment transactions on their behalf without incurring UK taxation.
The “designated crypto assets” will be treated as stocks and other assets governed by UK funds acting on behalf of non-UK investors. The HMRC decision is in line with the UK government’s FinTech Sector Strategy, which aims to strengthen the country’s status as a financial hub and encourage new cryptocurrency investment management businesses to base themselves in the UK.
However, there are signs of a shift in attitude among UK regulators towards the cryptocurrency sector. Ashley Alder, the incoming head of the UK’s Financial Conduct Authority (FCA), has recently accused cryptocurrency-related businesses of being “deliberately evasive” and facilitating money laundering.
The FCA recently called on lawmakers to support and create proper modalities for crypto bans.