The FCA on Regulating Cryptocurrencies
The Financial Conduct Authority (FCA) has recently confirmed that firms that deal in cryptocurrency derivatives need to be duly authorised and regulated. This statement precedes a review of the cryptocurrency market due later this year, which was announced in the FCA’s Business Plan for 2018/2019. The review is a joint effort between the FCA, the Bank of England and the Treasury.
A cryptocurrency is defined as ‘a digital currency produced by a public network, rather than any government, that uses cryptography [codes which keep information safe in computer networks] to make sure payments are sent and received safely’. The first cryptocurrency was Bitcoin, and it is still the biggest, though other, ever more obscure-sounding ones have sprung up – such as Litecoin and Dogecoin.
Cryptocurrencies have grown in importance for both markets and regulators in recent years. The anxiety is justified, as the trading of cryptocurrencies constitutes a new and relatively unregulated market. The (now former) New York Attorney General, Eric Schneiderman, announced that his office has launched the Virtual Markets Integrity Initiative, a fact-finding inquiry into the policies and practices of platforms used by consumers to trade cryptocurrencies. The inquiry springs from concerns about the transparency and accountability of such trading – these are serious issues, given that the Bitcoin market reached $118bn at the start of April.
In the UK, neither the Bank of England nor the FCA regulates the trade in cryptocurrencies as such. However, in 2017 the FCA issued consumer warnings on cryptocurrency Contracts for Difference (CFDs) and the risks of Initial Coin Offerings(ICOs), where the issuer accepts a cryptocurrency in exchange for a proprietary ‘coin’ or ‘token’ related to a specific firm or project. The FCA warned that the value of cryptocurrency CFDs is extremely volatile and suffers from a lack of transparency, while ICOs are not FCA regulated and provide no investor protection in the UK. Moreover, the FCA held that trading in financial instruments with cryptocurrencies as the underlying assets – for example cryptocurrency futures, CFDs and options – is likely to require regulatory authorisation.
As announced in July of last year, the 2020 Budget introduces a new deferred payment plan option for Corporation Tax charged on profits or gains arising from certain transactions between UK companies and EEA companies of the same group of companies.
Reversal of Inverclyde
The 2020 Budget announced provisions to reverse last year’s FTT decision in Inverclyde. In that case, HMRC denied the appellant LLPs’ claims for Business Property Renovation Allowance on the basis that the LLPs did not carry on a business with a view to a profit.
HMRC nudge letters
HMRC continues to fight the good fight in its quest to cut down on tax avoidance and have recently been issuing further “nudge” letters to taxpayers who may have an income source or assets producing gains overseas and consequently an undisclosed outstanding UK tax liability.
ExxonMobil: FTT Decision Released
The FTT decision in Esso Exploration and Production UK Limited and others v HMRC, which relates to pre-2006 claims for Cross Border Group Relief, has now been released.