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HMRC scraps VAT on bitcoin currency

The UK tax authority HMRC has announced plans to scrap VAT on the bitcoin currency in the nation, with new guidance published by the organisation on the matter.

Members of the UK Digital Currency Association (UKDCA), which held talks with HMRC in late 2013/early 2014, have welcomed the decision and predicted that the announcement will pressure the Financial Conduct Authority (FCA) to publish guidance on the digital currency.

Tom Robinson, UKDCA director and co-founder of bitcoin, insured storage firm Elliptic Vault, said: "It's a very progressive view. The decision really puts pressure on the FCA because if it's money, then they should be regulating it. The last barrier is financial regulation. The only issue is the FCA still refuses to say anything about it."

HMRC announced its decision to scrap the 20 per cent VAT on bitcoin just days after one of the leading exchanges, Mt. Gox, lost almost $500 million of customer deposits.

The global market for bitcoin is currently worth about $7 billion at current market rates and nations all over the world have been grappling with regulating the cryptocurrency , with some authorities believing that it could be used as a means of tax evasion or money laundering.

But, HMRC's guidance issued on Monday (4 March), said VAT would not be levied, on the basis of EU rules that apply to currencies. Trading and other activities, such as charges for verifying transactions, "are exempt because they fall within the definition of 'transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments'".

The decision comes as the Bitcoin Foundation told the Financial Times it is planning to redomicile from the US to the UK this spring, as the UK is regarded as a more favourable jurisdiction for those involved in the industry.

Jon Matonis, the executive director of the organisation, explained that it is currently looking for staff and office space in London.

By Gary Cooper