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You can make a certain amount of capital gains in the UK without paying tax. It's in the region of 10K I think. I guess buying bitcoin at market price and selli

You can make a certain amount of capital gains in the UK without paying tax. It's in the region of 10K I think. I guess buying bitcoin at market price and selling at 'a different market price' counts as capital gains on an investment until the point where you've made enough money to have to declare it. And this would be on your tax form at the end of the year. At least that's how I understand it. I'm not an accountant but have been unloading a few coins this year and I'm pretty sure I don't need to declare anything until I make more than a certain amount across all my investments. https://www.gov.uk/personal-tax/capital-gains-tax https://www.gov.uk/personal-tax/capital-gains-tax

Chirael 12y ago
In the US, as I understand it you wouldn't be able to use capital gains on this kind of thing because you haven't held the Bitcoins for a year. It would be "short term capital gain" which would be the same as ordinary income. The real risk here is that if you don't track all the transactions and report and pay taxes on the profit (at, likely, ordinary income tax rates), you'll get nailed for tax evasion. I imagine (though I have no experience) that this must be similar to having a marijuana based business. If you want to be legit you have to open a bank account... but not a lot of banks want to touch a business like that. You might think you could just lie on the bank account opening form where it asks about what the business will be doing, and say you're opening a coffee shop or food cart (something with cash sales), but then you could be nailed for lying on a form, and since (again in the US) most accounts are FDIC insured, that could be under the rubric of lying to the Federal government (not good). I don't have direct experience with this, IANAL etc., but these are some loose concepts that come to mind. Too bad, great idea, classic good example of arbitrage/exploiting market inefficiencies. I think it's even do-able legitimately, though it's slightly too far along the risk-reward curve for my taste ATM.
dragonwriter 12y ago
Whether or not you have to pay taxes on the proceeds of the endeavor is an orthogonal question to whether or not you need a business license to engage in the endeavor.

Chirael 12y ago

In the US, as I understand it you wouldn't be able to use capital gains on this kind of thing because you haven't held the Bitcoins for a year. It would be "short term capital gain" which would be the same as ordinary income. The real risk here is that if you don't track all the transactions and report and pay taxes on the profit (at, likely, ordinary income tax rates), you'll get nailed for tax evasion. I imagine (though I have no experience) that this must be similar to having a marijuana based business. If you want to be legit you have to open a bank account... but not a lot of banks want to touch a business like that. You might think you could just lie on the bank account opening form where it asks about what the business will be doing, and say you're opening a coffee shop or food cart (something with cash sales), but then you could be nailed for lying on a form, and since (again in the US) most accounts are FDIC insured, that could be under the rubric of lying to the Federal government (not good). I don't have direct experience with this, IANAL etc., but these are some loose concepts that come to mind. Too bad, great idea, classic good example of arbitrage/exploiting market inefficiencies. I think it's even do-able legitimately, though it's slightly too far along the risk-reward curve for my taste ATM.

dragonwriter 12y ago

Whether or not you have to pay taxes on the proceeds of the endeavor is an orthogonal question to whether or not you need a business license to engage in the endeavor.