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My question regards taxation on earnings that I have been…

My question regards ***** *****...
My question regards ***** ***** earnings that I have been paid in Bitcoin.I am a sole trader working in the online marketing space, residing and paying tax in the UK.I have been providing marketing services for a Canadian company for many years and accepting payments from them in US dollars.However, since June 2016 this company changed their payment policy and now they only process payments in Bitcoin. So, although my earnings are in USD, I get paid in Bitcoin.Since I could not find a way to accept Bitcoin payments that I was comfortable with (I was concerned about potential security issues), the earnings have been accumulating with this Canadian company, but I could not receive payment because I had not set myself up with a Bitcoin payment account.This month, I finally set up a Bitcoin payment account and in December 2017 the company paid me for earnings relating to the period June 2016 to November 2017.I did $2,000 of work per month between June 2016 and November 2017 ($2,000 per month for 18 months), then in December 2017, these earnings ($36,000 in total) were converted from USD to Bitcoin and paid to me, into my Bitcoin account.My question is, how do I account for these earnings on my 2016-17 and 2017-18 self-assessment forms? And also, what are the capital gains tax implications with regard to holding these Bitcoins going forward?Do I file a single payment made in December 2017 in USD in my 2017-18 tax form, or do I account for the $5,000 USD payments individually, as they accumulated, even though they weren’t paid to me until December 2017?At the same time, now I personally own the Bitcoin, how would any future gains or losses on these Bitcoins be regarded for tax purposes if I decide to convert them into flat currency? Is it classed as regular currency, or would movements in exchange rates be liable to capital gains tax?If I decide not to convert the Bitcoin to flat currency, but decide to spend them instead (Many shops now accept Bitcoin, like Expedia and Microsoft) what tax implications would that have? Would there be any capital gains or loss implications due to currency movements, even though I didn’t convert the Bitcoin into flat currency?Thanks in advance
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Answered in 2 hours by:
1/3/2018
Tax Robin
Tax Robin, Tax Preparer
Category: UK Tax
Satisfied Customers: 17,872
Experience: 15 years experience with H & R Block in International Tax Law
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Hello, I'm Robin. Welcome to JustAnswer. I'm reviewing your question now and typing up my reply. I'll post that in just a few moments.

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Do I file a single payment made in December 2017 in USD in my 2017-18 tax form, or do I account for the $5,000 USD payments individually, as they accumulated, even though they weren’t paid to me until December 2017?

Account for each payment individually. The conversion rate for each then would be used (US to UK rates)

At the same time, now I personally own the Bitcoin, how would any future gains or losses on these Bitcoins be regarded for tax purposes if I decide to convert them into flat currency? Is it classed as regular currency, or would movements in exchange rates be liable to capital gains tax?
If you convert these bitcoins to flat any gain would be taxable to you. The gain being the difference in the individual accounting and the conversion rate.
If I decide not to convert the Bitcoin to flat currency, but decide to spend them instead (Many shops now accept Bitcoin, like Expedia and Microsoft) what tax implications would that have? Would there be any capital gains or loss implications due to currency movements, even though I didn’t convert the Bitcoin into flat currency?

If you spend them then you are not taxed again as you were taxed on the income as it arose. Spending is not converting so no CGT on any gain.

Thank you in advance for a positive rating

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Customer reply replied 4 months ago
Hi Robin, thanks for the answers, that's really useful.Just re-reading my first part of the question you answered, there was typo (I used the word 'payment' instead of 'invoice' - I invoiced for $2,000 of work each month from July 2016, but was only paid in December 2017) it should have actually read like this:"Do I file a single payment made in December 2017 in USD in my 2017-18 tax form, or do I account for the $2,000 USD invoices individually, as they accumulated, even though they weren’t paid to me until December 2017?I am presuming that your answer stays the same, but just want to confirm?

Yes my answer stays the same.

You are most welcome.
A positive 5 star rating is appreciated so I am credited for assisting.

Tax Robin
Tax Robin, Tax Preparer
Category: UK Tax
Satisfied Customers: 17,872
Experience: 15 years experience with H & R Block in International Tax Law
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Customer reply replied 4 months ago
Thank you very much - 5 star work :)
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