Is there VAT on cryptoassets

Q: What mistakes do businesses make with crypto and VAT?

Charging VAT on the token. Selling or exchanging exchange tokens for money is exempt; adding VAT to the token price is wrong. Forgetting VAT on sales paid in crypto. Being paid in tokens does not make a taxable sale exempt. Output tax is due on the sterling value. Using the wrong value. HMRC uses the sterling value at the point the transaction takes place, not the value when the tokens are later sold or the agreed price in a different currency. Reclaiming VAT on mining equipment. Mining rewards are outside the scope, so VAT on costs used for mining is not attributable to taxable supplies. Assuming every platform fee is exempt. Only charges meeting the intermediary conditions in VATFIN7200 fall within Item 5. Ignoring the provisional status. HMRC describes its position as provisional, so the guidance should be checked periodically. Crypto also has separate accounting questions, such as whether tokens are inventory or intangible assets, which are covered in our guide to accounting for cryptoassets. For the income tax position on staking, see crypto staking rewards. If HMRC opens a check into your return, tax investigation insurance pays your accountant's fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Exchanging cryptoassets such as bitcoin for pounds, or pounds for cryptoassets, is exempt from VAT as a financial transaction. If a customer pays for goods or services in crypto, VAT is due on those goods or services in the normal way, measured by the sterling value of the tokens at the time, but there is no VAT on the tokens themselves. HMRC treats mining rewards as outside the scope of VAT altogether.

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What does HMRC say about VAT on cryptoassets?

HMRC sets out its VAT position in the Cryptoassets Manual at CRYPTO45000. It covers four situations: goods or services sold in exchange for exchange tokens, the supply of the tokens themselves, mining, and charges made for arranging transactions in tokens. “Exchange tokens” is HMRC’s term for bitcoin and similar cryptoassets used as a means of exchange or investment.

Two points are worth knowing before going further. First, there is no special VAT code for crypto. HMRC applies the ordinary financial services exemption in Group 5 of Schedule 9 to the VAT Act 1994 and the ordinary rules on what counts as a supply. Second, HMRC says the treatments in CRYPTO45000 are provisional, pending further developments in the regulatory and VAT positions. A business with large or unusual crypto activity should check the manual for changes rather than relying on an old opinion.

Why is exchanging crypto for money exempt?

Item 1 of Group 5, Schedule 9 exempts “the issue, transfer or receipt of, or any dealing with, money, any security for money or any note or order for the payment of money”. HMRC decided in 2014 that the services of bitcoin exchanges in exchanging bitcoin for legal tender and vice versa fall within this item and are exempt.

The position was confirmed by the Court of Justice of the EU in David Hedqvist (case C 264/14). Mr Hedqvist planned to exchange traditional currency for bitcoin and back, charging no separate fee and making his profit on the spread between buying and selling prices. Following its earlier judgment in First National Bank of Chicago (case C 172/96), the court held that the exchange transactions were supplies of services for consideration, and that exchanging traditional currency for a non legal tender currency such as bitcoin, and vice versa, was a financial transaction within the exemption in Article 135(1)(e) of the VAT Directive.

CRYPTO45000 therefore states that a supply of any services required to exchange exchange tokens for legal tender, or for other exchange tokens, and vice versa, is exempt under Item 1. That covers the spread a dealer earns as well as any explicit charge built into the exchange. More detail on how the wider exemption works is in our guide to the VAT financial services exemption.

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Are broker and platform fees exempt too?

Often, yes. CRYPTO45000 says charges, in whatever form, made over and above the value of the exchange tokens for arranging transactions in tokens are exempt under Item 5 of Group 5, provided the arrangement meets the intermediary conditions in HMRC’s VAT Finance Manual at VATFIN7200. Item 5 covers intermediary services in relation to transactions within Item 1 by a person acting in an intermediary capacity, whether or not the transaction is finally concluded.

These conditions need checking case by case. A business that simply provides software, hosting, data feeds or marketing to a platform is not necessarily acting as an intermediary between buyer and seller, and those services can be standard rated. The question is whether the business is bringing the parties together or doing work preparatory to the transaction in an intermediary capacity, which is what VATFIN7200 and the pages under it examine.

What happens when a customer pays in crypto?

CRYPTO45000 is direct: VAT is due in the normal way on any goods or services sold in exchange for exchange tokens. The crypto is simply the method of payment. A shop selling a standard rated item, or a consultant selling standard rated services, accounts for output tax exactly as if paid in pounds.

The value of the supply is the pound sterling value of the exchange tokens at the point the transaction takes place. The customer’s handover of tokens is not itself a supply on which VAT is charged; CRYPTO45000 says no VAT is due on the supply of the token itself when tokens are exchanged for goods and services.

Illustration only. A VAT registered web designer agrees a fee of £1,000 plus VAT and accepts payment in bitcoin. At the moment of payment, the bitcoin received is worth £1,200 in sterling. The designer accounts for £200 output tax on the return, just as for a sterling payment. If the bitcoin later rises or falls before the designer sells it, that movement has no effect on the VAT already due; any gain or loss is a direct tax question, covered in our guides to cryptoasset tax and cryptoassets held by a company.

The practical task is evidence. Keep a record of the exchange rate source and the time used to convert the tokens into sterling, so the value on the invoice and in the VAT records can be justified if HMRC asks.

Is crypto mining income subject to VAT?

No. CRYPTO45000 says exchange tokens received by miners for their mining activities will generally be outside the scope of VAT. HMRC gives two reasons: the activity is not an economic activity for VAT purposes because there is an insufficient link between any services provided and any consideration, and there is no customer for the mining service.

Being outside the scope has consequences on both sides of the VAT account. No output tax is due on mining rewards. Equally, mining rewards are not taxable supplies, so they do not count as taxable turnover when testing against the VAT registration threshold, which is £90,000 of taxable turnover over 12 months for 2026 to 2027 according to GOV.UK. A business that does nothing but mine has no taxable supplies on which to base a registration.

On the cost side, section 26 of the VAT Act 1994 only allows credit for input tax attributable to taxable supplies (and certain other specified supplies). VAT on mining hardware, electricity and hosting used to generate outside the scope rewards is not attributable to taxable supplies, so a business that mines alongside a taxable trade cannot treat that VAT as recoverable simply because it is VAT registered for its other activities.

How does exempt crypto activity affect VAT recovery?

A business that deals in exchange tokens, or charges exempt intermediary fees, is making exempt supplies. Under section 26, input tax used to make exempt supplies is generally not recoverable, so the business must attribute its costs between taxable and exempt activities using a partial exemption method. Our guide to partial exemption explains the standard method, and the de minimis limits may allow small amounts of exempt input tax to be recovered.

A trading business that simply accepts crypto from customers is in a different position. Its sales remain taxable at the normal rate and the crypto is only consideration, so its input tax position follows its main trade.

What mistakes do businesses make with crypto and VAT?

Charging VAT on the token. Selling or exchanging exchange tokens for money is exempt; adding VAT to the token price is wrong.
Forgetting VAT on sales paid in crypto. Being paid in tokens does not make a taxable sale exempt. Output tax is due on the sterling value.
Using the wrong value. HMRC uses the sterling value at the point the transaction takes place, not the value when the tokens are later sold or the agreed price in a different currency.
Reclaiming VAT on mining equipment. Mining rewards are outside the scope, so VAT on costs used for mining is not attributable to taxable supplies.
Assuming every platform fee is exempt. Only charges meeting the intermediary conditions in VATFIN7200 fall within Item 5.
Ignoring the provisional status. HMRC describes its position as provisional, so the guidance should be checked periodically.

Crypto also has separate accounting questions, such as whether tokens are inventory or intangible assets, which are covered in our guide to accounting for cryptoassets. For the income tax position on staking, see crypto staking rewards.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.