Mr Bull says an important consideration to explain to clients is "the taxable profit may be based on the value of the cryptocurrency, rather than on the proceeds of the sales which have been made". This means that tax may be payable before the cash proceeds of the sale are available to pay the tax bill.
3) Corporation tax
Any corporate users will find chargeable gains taxed at corporation tax rates. Likewise, any corporate miner or cryptotrader will find their profits and gains chargeable to corporation tax.
4) VAT
"HMRC treats coin-mining activities as falling outside the scope of VAT," says Mr Bull. "Activities other than mining are exempt from VAT, as are the sales of any cryptocurrency." There is also no VAT applicable to fees or commissions earned from arranging or carrying out crypto transactions, says Mr Bull.
But there is a "sting in the tail". Mr Bull warns: "HMRC's guidance makes it clear any transaction using cryptocurrencies must be looked at on a case-by-case basis, taking into account the specific facts.
"HMRC goes on to illustrate this with the example of speculative transactions, which may not be taxable because they are much more akin to gambling and betting."
In the UK, gambling or betting wins are not taxable for the ordinary punter. But the losses from gambling or betting cannot be offset against taxable income or gains.
Therefore, says Mr Bull: "If Bitcoin owners incur huge losses following the recent slide in values, don't bank on HMRC coming to the rescue with tax relief for those losses."
Personal touch
Philipp Pieper, chief executive of Swarm Fund, thinks people should not be as scared of - or as speculative about - cryptocurrency as they are.
He advises: "The path I took myself and what I would advise is to start off with a personal investment. Be your own guinea-pig. Once you do, you will learn first-hand what it's all about.
"Another way is to find people or organisations who are experts and can guide you through it." He recommends, among others, places such as Coin Base, which allows people to buy cryptocurrencies in a legitimate way and interfaces with traditional banks.
The more familiar people become with it, the more services will evolve to help make it more "specialised and credible", Mr Pieper adds.
simoney.kyriakou@ft.com
