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scams involving cryptoasset investments that are hard to distinguish from genuine investment opportunities. The FCA’s cryptoasset page can be found here: https://bit.ly/3QmoPUa. The UK government is currently working with other jurisdictions and the global banking sector considering how to regulate cryptoassets Cryptocurrency and employment tax implications When faced with having to answer client questions on cryptocurrency in the context of employment-related remuneration planning, it’s easier to break this concept down and see it for what it really is – employment earnings. If someone is a statutory director or employed under a UK employment contract and they’re a UK taxpayer, then the method of payment is largely irrelevant because an income tax (pay as you earn) liability applies to it, whether it’s ‘money’ or ‘money’s worth’. Cryptocurrency is capable of being converted into traditional money and therefore it’s defined as ‘money’s worth’ by HM Revenue and Customs (HMRC). Back to reality, then, courtesy of Section 62 of ITEPA 2003. The benefits code within ITEPA 2003 will also apply to any BIKs provided by way of cryptocurrency. HMRC’s Cryptoassets Manual replaced the two original manuals, ‘ Cryptoassets: tax for individuals ’ and ‘ Cryptoassets: tax for business ’ on 30 March 2021. The new manual was last updated on 22 February 2022 and can be found here: https://bit. ly/3RB42gI. HMRC internal manuals at CRYPTO42050 discuss making payments to employees and where pension contributions are made with cryptocurrency. This guidance can be found at CRYPTO43000. CRYPTO42050 is available here: https://bit.ly/3x3I7H0 and CRYPTO43000 can be found here: https:// bit.ly/3qnBNGk.
What about National Insurance contributions (NICs)? The NICs legislation at Section 3 of the Social Security Contributions and Benefits Act (SSCBA) 1992 mirrors the tax legislation – so what’s deemed to be employment earnings for tax purposes is also employed earner’s earnings for NICs purposes. The HMRC internal manual at CRYPTO42200 discusses the National Insurance treatment. BIKs provided by way of cryptocurrency should be declared on P11Ds and will attract class 1A NICs, just like any other BIK. CRYPTO42200 can be found here: https://bit.ly/3S08khR. A note on national minimum wage (NMW) ICAS wrote to the Department for Business, Energy and Industrial Strategy (BEIS) in July 2022, to ask for confirmation on how cryptocurrency is classified for NMW purposes. A request was made for suitable wording to be included in the NMW guidance manual (published by HMRC but governed / legislated by BEIS) to cover this off. BEIS has responded to say that “Cryptoassets, like other BIKs, are not considered to form part of a workers’ remuneration for NMW purposes under Regulation 10 of The National Minimum Wage Regulations 2015. As such, cryptocurrency isn’t something we currently have plans to produce NMW guidance on.” In the interests of risk mitigation, it’s probably prudent to ensure an employee or worker who’s eligible to receive NMW is paid at least that part of their salary in cash or ‘fiat money’ (inconvertible paper money made legal tender by a government decree). This will ensure an NMW breach cannot be deemed to have occurred. Further guidance is also provided in the HMRC manuals on the tax treatment of benefits provided by third parties, and payments which aren’t readily convertible assets. That guidance is available here: https://bit.ly/3RtNwPJ. Many tax experts now regularly involved in the cryptoasset advisory space disagree with HMRC about its classification of cryptoassets as ‘money’s worth’. However, until regulation, followed by legislative provisions and tax cases collectively come into play down the line, the Cryptoasset Manual is what we must work with, and HMRC’s position is clear . n
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ICAS provides a further guide to cryptocurrency here: https://bit.ly/3qjkbeY.
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| Professional in Payroll, Pensions and Reward |
Issue 84 | October 2022
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