Press Room

19 Apr 2023

Accepting Payment In Cryptoassets: The Impacts – Dion Seymour

Crypto Tax & Accounting Technical Director, Dion Seymour, discusses the tax implications of using crypto for business payments, and highlights the distinction between Central Bank Digital Currencies (CBDCs) and cryptoassets, in IFC Review.

Dion’s article was published in IFC Review, 19 April 2023.

Cryptocurrencies have often been referred to, at least in the earlier days, as digital money, with Bitcoin being the best known cryptocurrency. Cryptocurrency maximalists have claimed that Bitcoin will become a global currency, removing the need for different fiat currencies, such as Sterling and Dollars. However, few jurisdictions consider that cryptocurrencies are money with most of them considering that cryptocurrencies to be a non-monetary asset. This is driving the view behind the increasingly common term “cryptoassets” rather than cryptocurrencies. This is not to say that cryptoassets cannot be used as money, for example El Salvador has made Bitcoin legal tender and it is possible to pay for goods using Bitcoin. In the UK, bodies such as the Bank of England (BoE) and HMRC have made it clear that they do not consider cryptoassets to be money.

As cryptoassets are not money, certainly in the UK, this means that when a transaction using cryptoassets is undertaken, it cannot be treated in the same way as if it was with money. The use of non-monetary assets can bring surprising outcomes for both the payer and the recipient.

The payer

For the payer, once payment has been made for the goods or services, this is considered to be a “disposal” for tax purposes. This means that when an individual makes a purchase of a coffee, they may not realise that by using cryptoassets (a non-monetary asset) they may have tax to pay.

Why is this? The simple answer is that when the individual makes the payment, this is considered to be a disposal as they no longer own them. There is no minimum value for a disposal to occur so even when they use cryptoassets to buy a coffee, this will be treated as a disposal. Recent HMRC market research[1] identified that only 16% of cryptoasset owners realised that if they used cryptoassets to buy goods and services this could incur a tax charge on them.

There is a wider question that arises as to whether businesses accepting payment in cryptoassets have a responsibility to highlight this. They should, at least, include an appropriate disclaimer on its invoice, or other communication, that responsibility for the payer’s tax liability and reporting obligations belongs to the payer. For the invoice to be a valid VAT invoice in the UK and EU, the payment amount and/or VAT amount would also need to be converted to local currency (i.e. Sterling or Euro).

Impact on businesses

Where a business receives cryptoassets, there are also potential outcomes that it needs to be aware of. Upon receipt of cryptoassets, it will need to assess the value of the cryptoassets in its functional currency (i.e. the currency in which it operates / draws up its accounts) to determine its revenue figure and apply the appropriate accounting treatment.

The business will either need to dispose of the crypto to fund their corporation tax and any VAT liability or use their fiat to cover this, impacting cash flow considerations.

If the business does not convert its cryptoassets immediately, any movements in the value of the cryptoassets could lead to a gain or loss when the business eventually disposes of its cryptoassets.  It is ordinarily a strong recommendation that the business calculates its CT and VAT liabilities and converts sufficient cryptoassets to convert this upon receipt to removing exposure to wild fluctuations.

If the business is still holding cryptoassets at the end of its accounting period, it may need to account for any downward movement in their value taking a loss to their Profit and Loss (P&L). Depending on the type of business, and whether they account on a mark-to-market basis (i.e. measuring the fair value of assets and liabilities), they may have to also recognise any upward movements and taking an unrealised gain to the P&L. In other words, the business will have:

  • a corporate tax liability in respect of the revenue;
  • a potential corporate tax liability in respect of any unrealised gains.

Just as in the example above when a business pays for goods or services in cryptoassets this is a disposal which will result in a chargeable gain or loss for the business.

The cost of the goods or services, to the extent wholly and exclusively for the purposes of the business, would be tax deductible against the revenue, as if the payment had been made in fiat. For most businesses, the amount that can be deducted is the fiat equivalent at the time of payment.

When cryptoassets are transferred there are ordinarily “gas” fees (a fee paid to validators of transactions on the blockchain). The gas fees are payable in cryptoassets (usually in the same cryptoasset as the transaction) and this too is a disposal (i.e. any gain or loss in the crypto needs to be recognised). However, the gas fee would be a tax deductible expense for the business.

Businesses can pay their employees in cryptoassets. Again, this is a disposal and any gain or loss recognisable. In addition, the business must withhold PAYE and pay employees’ NICs. This means the business will need to withhold broadly 50% of the cryptoassets they wish to pay to the employee and either fund the PAYE / employees’ NIC out of their any fiat currency held or convert the cryptoassets into fiat currency. Careful planning is required to, ideally, match receipts of cryptoassets with payments in cryptoasset so as to minimise exposure to the volatile movements in the valuation of these assets.


Payment in stablecoins (cryptoassets that are intended to have a stable value) could reduce some of the complexities that are detailed above. This is because one of the main issues, at least at first glance, is around the price volatility of cryptoassets. A popular stablecoin is called Tether for which the 24 hour transaction volume is usually measured in the billions. However, as most stablecoins are pegged (or meant to be pegged) to the US Dollar this does not remove the volatility when compared to pounds Sterling. The recent economic turmoil meant that stablecoin owners actually made gains as the value of Sterling slid against the US Dollar.

A pounds sterling stablecoin would remove some of the issues around volatility, however, it would still be considered as a non-monetary asset with the accompanying accounting considerations.


Ignoring the tax implications, widespread use is still restricted by scalability, and this is a major impediment for widespread acceptance. The Visa network can process 24,000 transactions per a second, PayPal 193, however the Bitcoin network can only process seven transactions per second[2]. If you are waiting for your transaction to clear in a coffee shop your coffee may be cold by the time it has.

To address this a “second layer” is being added to the Bitcoin network, called the Lightning Network, that increases Bitcoin’s scalability which has been in development for several years. However, as acceptance of Lightning is limited this means that despite transaction volumes starting to rise there is still some way to go to match Visa.

Central Bank Digital Currencies

Recently, the Bank of England released a consultation paper on the possible Central Bank Digital Currency (CBDC) with the Governor of the BoE appearing at a Treasury Select Committee (TSC) on 1 March 2023. At the TSC the Governor stated that it was more likely than not that the development of a digital pound, or “Britcoin” as it has been increasingly called in the press, would go ahead. One of the main rationales provided was that many other jurisdictions are looking to create a CBDC and the BoE wants to ensure that, when it comes to payment, the UK does not lose its competitive advantage. A review of CBDC Tracker shows that, whilst few CBDCs have been launched (the Bahamas was first), there is significant activity across the globe.

CBDCs are invariably compared to cryptoassets (cryptocurrency) and, to a casual observer, they may appear similar, however a CBDC is not a cryptoasset. There are many reasons for this but, most importantly, unlike cryptoassets, a digital pound will be backed by the BoE. Even for cryptoassets that have some degree of counterparty, such as stablecoins like Tether, they would not be a currency (there is a difference between legal tender and a currency). Being issued by a central bank, or other authorised issuer, is significant with the credit risk resting with the BoE.

Many have pointed out that the development of CBDCs has been in response to the possibility of a cryptoasset that is provided by large technology companies. The Libra/Diem project from Facebook/Meta is an example of how an IT company could have influenced monetary policies. The response from regulators was swift.

Money is evolutionary. What we consider to be money now wasn’t a hundred years ago (no plastic cards back then) and it will certainly change in the next hundred years. Could spending on Web3 become just as easy as using a bank card? Only time will tell.


Accepting payments in cryptoassets is possible, however, it is also very challenging. Regulations are now being increasingly brought in worldwide to ensure that any developments will not impact the government’s monetary policies. Beyond the concerns of the scalability of regulations, whilst in development, this will need to be addressed to ensure that payment is convenient.

Bitcoin is now 15 years old[3] and despite being legal tender in some jurisdictions, global adoption as a worldwide currency and as a common means of payment still seems to be a long way off.



[3] Bitcoin whitepaper was written by Satoshi Nakamoto which was released in 2008

Dion Seymour

Dion is a Director with extensive experience in all aspects of the taxation of crypto assets. He was formerly the crypto asset policy and product owner at HMRC.

Email: Dion Seymour