Cryptocurrency regulation in the UK

London is considered to be one of the blockchain capitals of the world. Every year, the most significant number of large and small events dedicated to this topic occurs here, contributing to the crypto industry’s development. In many ways, this was made possible thanks to very soft crypto regulations in Britain. Local authorities are interested in the fact that this industry develops and brings a stable income to the budget. Today we want to discuss how cryptocurrencies are regulated in this jurisdiction and pay special attention to taxation.

Benefits of this jurisdiction

Obtaining a cryptolicense here is advisory, but all crypto organizations must undergo mandatory registration and pay taxes regularly. However, many organizations choose to get a work permit as there are many benefits.

First, Britain’s cryptocurrency regulation can change at any time. Now there is talk that there is a need to make licensing mandatory and that there is a need for more laws to better protect users from possible fraud or money laundering.

Secondly, obtaining a work permit in this jurisdiction is simple, but it makes it possible to work in many jurisdictions. It allows you to enter new markets and actively develop.

Thirdly, having a license is the primary proof that a crypto organization is ready to work honestly and openly, so it will be much easier for you to attract new customers and investors.

In addition, this jurisdiction has the most favorable taxation rules. The corporate tax rate here is one of the lowest among European countries, so that you can invest your profits in business development.

Thus, obtaining a work permit in this jurisdiction has many advantages; it will enable your business to thrive.

How to get permission to work in this jurisdiction?

Your organization must register with the FCA to operate legally in this jurisdiction. Organizations engaged in exchanging Britain crypto assets for fiat or other crypto assets, maintenance of crypto ATMs, or profit from the storage of crypto assets are subject to registration.

To obtain a work permit, you need to pay a state fee (the amount depends on the authorized capital of the organization), open a bank account, and collect the necessary package of documents.

Next, you need to submit an appropriate application. Crypto regulations have 6 months to consider your application, but if you provide an incomplete package of papers, this period can be extended up to 12 months.

crypto company in the UK

How to open a crypto company in the UK?

If you want to open an organization that works with cryptocurrency Britain, you must go through several necessary steps. To begin with, you need to think carefully about all aspects of your company, develop a suitable business model, think over ways to finance, and much more. The better you think through all aspects, and the more successful your business will be. In addition, you need to create software that will carry out transactions or store customer assets. Here, special attention should be paid to compliance with the rules on combating money laundering and financial terrorism. 

Your customers must provide identification documents, and the system must double-check all the data. You cannot discuss people who have previously been involved in fraud.

It would be best if you also chose a unique name. Please select several options and double-check them for uniqueness.

It would help if you opened a physical office. Key personnel such as directors and anti-money laundering specialists should work here. It is worth saying that special attention should be paid to the selection of personnel; all team members should not have a criminal record. Still, they should have experience in relevant positions and specialized education.

You also need to collect the necessary documents and check how your organization meets all the requirements; after that, you can apply for a cryptocurrency license in Britain.

Stages of opening a company with partial responsibility in the UK

If you want to open a company with partial liability, you need to go through the following main steps:
  • Select the name of the organization;
  • Recruit staff and select people who will hold leadership positions (including director, secretary, shareholders, and others);
  • Prepare memorandum and articles of association;
  • Determination of the scope of activity and creation of accounting;
  • Registration of the organization;
  • Registration in the tax;
  • Registration with the FCA.
Please learn in advance about the rules for regulating cryptocurrencies in this industry and create a company with them in mind.

Taxation of crypto companies in the UK

In 2021, the state authorities of this country created a precisely simple and understandable rule for the taxation of legal entities and individuals involved in the crypto business. Organizations that are engaged in taxation are subject to the following:
  • Exchange of tokens;
  • Mining;
  • Providing goods and services in exchange for tokens.
Such organizations are forced to pay the following taxes:
  • Corporate tax – 19%;
  • Tax on digital services – 2%;
  • VAT – 20%;
  • National insurance – depends on the experience of employees.
If you find it challenging to understand all aspects of taxation on your own, you can seek help from our specialists. They will study your organization’s activities and tell you what taxes and how much you are required to pay.

Income tax

Calculating income tax is difficult. You need to calculate how much profit your company received and subtract the following expenses:
  • The amount you paid for the asset;
  • Commission for including a transaction in the blockchain;
  • Advertising;
  • Professional expenses for the preparation of an agreement on the acquisition or alienation of tokens;
  • Valuation or allocation costs to calculate profit or loss.
If your organization incurs losses, you must report them to the regulators.

Digital Services Tax

An online marketing service for selling goods or services is a digital activity subject to taxation. An exchange whose purpose is to facilitate the sale of cryptocurrencies is taxed.

VAT

The exchange of crypto assets is not subject to VAT, which makes trading as simple as possible. Mining is also not subject to these taxes. However, you must pay this tax to purchase goods and services using such assets.

UK corporate reporting requirement

All crypto organizations are required to provide regular reports on their activities. Also, large organizations must undergo an annual audit. Government agencies scrutinize the actions of crypto firms to ensure that your organization is not being used for fraud or money laundering. All records must be kept for 6 years.

However, a number of organizations are not subject to audit. Usually, these include small firms with few employees and authorized capital. To learn more about corporate reporting, you can contact our specialists.

Cryptocurrency regulation in the UK

Types of business entities in the UK

There are several business entities in this jurisdiction, but crypto entities refer to:
  • Limited Liability Company (LLC);
  • Limited Liability Partnership (LLP).
The type of entrepreneurial entity choice depends on your business model’s characteristics, equity availability, and many other aspects. Our experts will study your organization’s activities and suggest which type is best for you, considering local legislation.

Conclusion

Today, the UK is home to many crypto enthusiasts, and many crypto organizations operate. Regulators are interested in developing the crypto industry as much as possible. Therefore, they strive to create the most simple regulatory rules. Although obtaining a license here is a recommendation, we advise you to get a work permit, as this will enable your business to operate more successfully.

FAQ

Yes, there are strict rules for regulating the crypto industry, mainly focused on combating money laundering and financial terrorism.

Enough rules have been created in this jurisdiction to tax individuals and legal entities engaged in cryptocurrency activities. The amount of taxes depends on many indicators, so you should contact our specialists to determine what amount of taxes your organization will pay.

Yes, but it warns that the use of such assets has a large number of risks.

It cannot be said that today in this country, there is a well-thought-out legal framework for regulating crypto assets, but the first steps in this direction have already been taken. They are aimed at taxing and protecting citizens from money laundering and financial terrorism.