HMRC has published guidelines explaining how UK VAT rules apply to UK and overseas businesses involved in cryptoasset transactions, including businesses that sell or exchange cryptocurrencies and other tokens, as well as digital platforms and marketplaces that facilitate these transactions. The guidelines cover VAT registration requirements, customer information that must be collected, place-of-supply rules, and record-keeping obligations.
Main VAT Rules for Cryptoassets
According to the guidelines, businesses involved in cryptoasset transactions must assess whether they are required to register for UK VAT, taking into account their sales and customers. Certain businesses may be exempt from registration, including those making only zero-rated UK sales, overseas sellers supplying UK non-business customers exclusively through online marketplaces, and businesses whose UK sales are entirely to VAT-registered customers in Great Britain who account for VAT under the reverse charge.
Furthermore, HMRC clarified that businesses must identify the customer, establish their location, and determine whether they are acting as a business or a private consumer. Insufficient information may result in under-declared VAT, HMRC compliance checks, tax adjustments, interest, and penalties. Keeping complete, up-to-date VAT records and collecting sufficient customer information to determine the correct VAT treatment are also key compliance requirements.
The applicable place-of-supply rules depend on the nature of the supply and the customer’s status. For B2B services, the place of supply is generally where the customer is established, subject to specific exceptions, including the use and enjoyment rules. For B2C electronically supplied services, the place of supply is generally where the customer is located.
Businesses must also determine whether their cryptoasset-related activities qualify as digital services, as different place-of-supply rules may apply. When supplying digital services directly, UK VAT generally applies to UK customers, while supplies to overseas customers may fall outside the scope of UK VAT but trigger obligations abroad. Where a third-party platform or marketplace facilitates sales, the platform may be responsible for accounting for VAT, depending on the circumstances. For cross-border B2C digital services, businesses generally need two pieces of evidence establishing the customer’s usual location, unless a specific presumption applies.
Conclusion
As cryptoassets continue to evolve, compliance with HMRC’s guidance is essential for both UK and overseas businesses. Applying the correct place-of-supply rules, keeping thorough customer records, and confirming who is responsible for VAT on platform sales will help businesses reduce tax risk and report VAT accurately.
