Prediction: Bitcoin is already controlled by central banking system and an attempt will be made to replace the Federal Reserve system with it. Canada, Australia and the UK are already involved with it, and the reason for dropping the VAT is because they don't want to tax themselves. China is also buying huge quantities of Bitcoin. -Bill
VAT On Bitcoin, UK Tax Authority HMRC Changes MindDecember 06, 2013
Back in November, UK tax authority HM Revenue and Customs (HMRC) announced they intended to classify bitcoins as vouchers, meaning there would be an applicable VAT on bitcoin.
Now, after a meeting between HMRC and UK proponents of bitcoin it appears there has been a shift in thinking and intentions.
Tom Robinson of BitPrice took to reddit to announce the news:
BitPrice just had a very positive meeting with HMRC regarding VAT and Bitcoin… We explained in detail what Bitcoin is and how it is used, following which they agreed that their categorisation of Bitcoin as: “a face-value voucher… likely ‘face value vouchers’” is inaccurate. They will be rescinding this advice.
The idea of bitcoins as a voucher would mean that VAT on bitcoin would be applied to the sale of bitcoins, creating a hindrance on viability, and this reassessment means that bitcoin markets have suddenly become much more certainly viable in the UK.
This does not imply that no taxes will be due with regards to any bitcoin transactions, rather:
HMRC are to take legal advice on exactly how Bitcoin should be treated with regards to VAT, but the meeting was very positive and I would expect further good news in the new year.
Pulling in people directly involved in the bitcoin scene in the UK such as Marc Warne of Bittylicious, Eitan Jankelewitz of Sheridans solicitors and Michael Parsons as well as the above quoted Tom Robinson shows governments are taking the idea of bitcoin seriously.
After all, this move will provide an incentive for those companies to abandon their plans to off-shore their businesses and avoid the 20% VAT on bitcoin sales implied by the previous classification of bitcoins as vouchers, creating a workable option for people looking to get involved in bitcoin to stay within the boundaries of the UK.