How Are Crypto Transactions Treated for Company Tax

Introduction

Cryptocurrency is treated as an asset rather than currency in the UK. This means HMRC does not view crypto such as Bitcoin or Ethereum as legal tender but instead as a type of property.

For companies, profits and losses from crypto transactions are generally subject to Corporation Tax, just like profits from other business activities. The exact tax treatment depends on how your business uses crypto, whether for trading, investment, or payment.

How HMRC classifies cryptocurrency for companies

HMRC distinguishes between three main types of crypto activity for companies:

Trading: Buying and selling crypto as part of the company’s regular business activity.

Investment: Holding crypto as an investment or store of value.

Use in operations: Accepting crypto as payment for goods and services or paying suppliers or staff in crypto.

Each of these uses has slightly different tax and accounting implications.

Corporation Tax on crypto trading profits

If your company actively trades crypto as part of its business, any profits are subject to Corporation Tax in the same way as trading stock or financial instruments.

You must calculate profits based on recognised accounting principles, usually by comparing the value of crypto assets at the start and end of your accounting period.

Gains are included in trading profits.

Losses are treated as trading losses and may be offset against other profits, subject to normal Corporation Tax rules.

If crypto trading is not your company’s main activity, the profits and losses may instead be treated as chargeable gains or capital losses.

Example

A UK limited company buys Ethereum for £50,000 and sells it for £70,000 during the same tax year. The £20,000 profit is added to the company’s taxable profits and subject to Corporation Tax at the current rate (for example, 25 percent for companies earning over £250,000 in profits).

Accepting or making payments in crypto

If your company accepts crypto as payment for goods or services, HMRC treats the crypto received as non-cash consideration. You must record the income at its fair market value in pounds sterling on the date of the transaction.

The same rule applies when paying suppliers or employees in crypto. The payment’s value must be converted into sterling at the time it is made, and this value is used for both tax and accounting purposes.

Fluctuations in the crypto’s value after the transaction are treated separately as capital gains or losses on the company’s crypto holdings.

Example

A company sells a product worth £5,000 and receives payment in Bitcoin. On the day of the sale, 0.1 BTC equals £5,000.

£5,000 is recognised as revenue for Corporation Tax.

If the company later sells the Bitcoin for £6,000, the £1,000 gain is treated as a chargeable gain and taxed accordingly.

Holding crypto as an investment

If your company buys and holds crypto as a long-term investment, any increase or decrease in value is treated as a chargeable gain or loss rather than trading income.

When the company disposes of the crypto (by selling or exchanging it), the gain or loss is calculated based on the difference between the purchase cost and the disposal value.

Gains are subject to Corporation Tax, while losses can usually be offset against other chargeable gains.

Companies must also follow UK GAAP or IFRS accounting standards, valuing crypto assets at fair value and recognising any revaluations through profit or loss.

Mining and staking

If a company mines or stakes cryptocurrency, HMRC assesses the activity to determine whether it amounts to a trade.

If mining or staking is carried out on a commercial scale and with the intention of making a profit, income is treated as trading income.

If it is not trading activity, the crypto received is still taxable as miscellaneous income when earned and subject to Corporation Tax.

When the mined or staked crypto is later sold, any change in value since receipt is treated as a chargeable gain.

Paying employees in cryptocurrency

If a company pays staff in cryptocurrency, HMRC treats it as employment income. You must:

Convert the value of the crypto to pounds on the payment date.

Deduct Income Tax and National Insurance through PAYE, as if the employee were paid in cash.

Record the payment value as a business expense for Corporation Tax purposes.

If directors or employees receive crypto as part of a remuneration package, this may also need to be reported to HMRC on a P11D form if it is classed as a benefit in kind.

Accounting for crypto in company books

Crypto assets must be recorded in company accounts at their fair market value in pounds sterling. Most companies treat them as intangible fixed assets under accounting standards, though the exact classification can vary depending on how the crypto is used.

Revaluations due to price fluctuations should be reflected in profit and loss statements, and supporting documentation should include:

Dates and values of all acquisitions and disposals.

Exchange rates used for conversions.

Transaction IDs and wallet details.

Accurate and transparent accounting is essential, as HMRC can request these records during a compliance review.

Record keeping requirements

HMRC requires companies to keep comprehensive records for all crypto transactions, including:

The type and quantity of crypto asset.

The date and value of each transaction in pounds.

The purpose of the transaction (trade, payment, investment).

The counterparties involved (exchange, wallet, or customer).

Records must be kept for at least six years after the end of the accounting period. Failing to maintain accurate records can result in penalties or difficulties proving costs and valuations.

Example scenario

A UK tech company accepts payment in Bitcoin for software services. During the year, it receives 1 BTC when the value is £25,000.

The company recognises £25,000 as income for Corporation Tax.

Six months later, it sells the Bitcoin for £28,000, creating a £3,000 gain.

The £3,000 gain is added to the company’s profits and taxed at 25 percent (£750 tax).

If the Bitcoin had fallen to £22,000 instead, the £3,000 loss could be offset against other capital gains.

Common mistakes to avoid

Recording crypto transactions in the wrong currency or at incorrect values.

Failing to convert crypto amounts to pounds at the time of the transaction.

Treating crypto as cash or foreign currency (it is classified as an asset, not currency).

Ignoring Corporation Tax obligations for crypto gains.

Mixing personal and company crypto wallets.

Conclusion

For UK companies, cryptocurrency is treated as an asset, not money. Profits from trading, payments, or disposals are subject to Corporation Tax, while crypto received for goods, services, or mining must be valued in pounds at the time of receipt.

Accurate record keeping and correct valuation are crucial for compliance. With HMRC paying increasing attention to digital assets, companies that use or hold crypto should seek advice from an accountant familiar with both crypto and UK tax law to ensure that all transactions are reported correctly.