Cryptoassets: Should I include them in my Will and is Inheritance Tax payable?
With a rise in cryptoassets and their prevalence in modern day society it is important to consider whether these should be included within a Will and perhaps more importantly how they will be valued for tax purposes upon death…
So perhaps a good place to start is actually defining what a cryptoasset is…
Many of us have heard of ‘Bitcoin’ after it becoming popular in the News headlines of late and ‘Bitcoin’ is a type of cryptocurrency, or cryptoasset and represent digital assets that an individual has legal rights over (meaning that they can transfer ownership, store it or trade it).
Cryptoassets are split into three categories:
- Exchange Tokens (including cryptocurrency such as Bitcoin);
These can be used as a method of payment but typically there is no person, group or asset underpinning these and so their value is used for exchange or investment.
- Utility Tokens;
These are provided by a particular business, or group of businesses, to provide the holder/owner with access to goods or services that they provide.
- Security Tokens
These are provided by businesses as a form of share or credit due to the holder by
HMRC has specifically, and categorically, stated that cryptoassets are not viewed as currency or money, so that means there is no cash value and they are exempt from Inheritance Tax and indeed any other taxes, right? Sorry, WRONG!
The liability for tax will depend on the type of cryptoasset and the use of the asset.
Cryptoassets will attract Capital Gains Tax when they are disposed of (sold, exchanged, used to buy other goods or services or given away/transferred to someone else), much like any other asset that is disposed of by an individual. Other taxes may also apply to cryptoassets depending on how they are used, however, we will only be focussing on Inheritance Tax here.
HMRC make it clear that the onus is on the individual, and no other third party/issuer or otherwise to keep records of their cryptoasset transactions and this should include:
- the category of cryptoasset;
- the date of the transaction;
- if the individual bought or sold the cryptoasset;
- the number of cryptoassets;
- the value of the transaction in GBP (£) – even where there is no pound sterling value an appropriate exchange rate must be calculated and records should be kept of the valuation method;
- the cumulative total of the investment in cryptoassets that is held by the individual;
- Bank statements if required for a review or enquiry.
So, what we all came here to find out…are cryptoassets included in the valuation of an Estate for Inheritance Tax purposes?
Cryptoassets have a value and so although they are not included as money or currency they are included within the valuation of an Estate under ‘PROPERTY’ for the purposes of calculating whether Inheritance Tax is payable.
If you would like to have a free chat about your Will, please contact us on info@TotalLegacyCare.co.uk or 01727 865 121
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