VAT treatment of cryptoassets

HMRC have published guidance setting out their view on VAT and cryptoassets.

HMRC define cryptoassets as “digital representation[s] of value that are created, stored and transferred securely using public computer networks, and cannot be altered or destroyed.”. The recurring example throughout is a non-fungible token (NFT), a unique digital certificate that represents ownership of an asset. The asset can be electronic, like digital art, or physical, like a car.

HMRC say that there are no specific rules for the VAT treatment of cryptoassets. Instead, sellers should look at the underlying asset and follow the appropriate VAT treatment.

The nature of cryptoassets mean two areas of VAT will often be relevant – digital services and marketplaces.

The sale of digital art through NFTs is probably their commonest use and is likely to be a digital service. For business-to-consumer (B2C) sales, VAT will be due where the customer is located. HMRC recommend that evidence of the customer’s location is obtained to support the VAT decision.

B2C sales of digital services to EU customers creates an obligation to pay VAT in the EU regardless of the value of sales. We can help register you via the One Stop Shop to meet these obligations.

B2C sales to UK customers will be subject to UK VAT. Overseas traders should note that any sale to a UK consumer would likely trigger a UK VAT liability.

Special VAT rules often apply when selling through online marketplaces. These rules can cover goods sold by overseas sellers, and the sale of digital services to consumers, like digital art. Consideration should be given to these rules when selling NFTs through marketplaces.

The VAT treatment of cryptoassets can be complex. If you would like help in this area, please contact the Albert Goodman VAT team or your usual AG contact.