What Financial Investment Companies Have Invested In Cryptocurrency

What financial investment companies have invested in cryptocurrency

What financial investment companies have invested in cryptocurrency

Can you invest in CryptoCurrency such as Bitcoin through a Limited Company?

 

Question, I am a freelancer operating through my own limited company and I am considering investing some money into Bitcoin or another CryptoCurrency. I am unsure whether to do this personally or to make the investments through my limited company, can you advise?

 

 

Answer, October 2017

Firstly we’re not going to get drawn into whether or not investing in CrytoCurrency is a good idea or not as we’re not financial advisors, we’ll just focus on some of the tax issues.

Company Investment vs Personal Investment

If you choose to invest company funds in a CryptoCurrency then these would be classified as an investment and your company will pay corporation tax on any gains made just like with any other business profits you make.

If you then want to personally extract these gains from your company you then have to consider any potential income tax on these dividends.

However if you make the investment personally then any gains you make will be treated under capital gains tax – the advantage of this is that you have an annual capital gains tax allowance which for 2017/18 is £11,300 – this means your first £11,300 of gains made are tax free.

You could potentially plan your future disposal of investments to ensure that you sell just enough to utilise your tax free capital gains tax allowance each year.

For this reason it is likely to be more beneficial to make the investment personally, rather than through your company.

Trading vs Investment Company

Another issue to consider when it comes to making investments through a company is that your company will currently be classified as a trading company, as opposed to an investment company, the main advantage of which is that in the future if you were to close your company down this will potentially entitle you to use a tax relief called entrepreneurs relief to pay a lower rate of tax on the final cash taken out of the company.

If you start making investments through your company you could jeopardise your entitlement to this – to qualify for entrepreneurs relief the company must be considered a trading company – HMRC typically use the 20% rule to assess if the company has significant investment activity or not – this article explains this in more detail.

Capital Gains Tax vs Income Tax

A further issue to be aware of, assuming you decide to make the investment personally, is that if you end up doing a lot of buying and selling of CryptoCurrencies i.e.

where you are essentially becoming a trader rather than an investor, then HMRC could determine that the activities are not investment but actually a trade.

HMRC use something called the ‘badges of trade‘ to assess if an activity is trade or an investment where they will consider things such as the number of transactions, the interval of time between purchase and sale and whether there was a profit seeking motive or not.

If your activities were classified as a trade, as opposed to an investment, then you would not become entitled to the capital gains tax allowance as the profits from the trading would instead be considered to be self employment income, and you would then have income tax and national insurance to consider.

This outcome is only really likely if you are doing regular short term trading – for most people they will make a few investments and sell them at a later date, in which case these would still be treated as capital gains.

 

Summary

This article is just a summary of some of the key tax issues to consider when it comes to investing in CryptoCurrencies – as a general rule, for most people it is likely to be better to make these investments personally rather than through their trading company.

Ultimate Investing In Cryptocurrency Guide In 2019