When you buy and sell digital currency within CoinJar, you are trading directly with CoinJar as principal. CoinJar quotes an exchange rate and is buying/selling digital currency from/to you in its own capacity.
HM Revenue and Customs (HMRC) outlined its provisional VAT treatment in 2014 pending further developments. For VAT purposes, digital currencies are treated as follows:
- when digital currency is exchanged for Sterling or for foreign currencies, such as Euros or Dollars, no VAT will be due on the value of the digital currencies themselves.
- charges (in whatever form) made over and above the value of the digital currency for arranging or carrying out any transactions in digital currency will be exempt from VAT under Article 135(1)(d) of the EU VAT Directive.
As such, VAT does not apply to buy/sell transactions within CoinJar.
When you trade on CoinJar Exchange, you are buying and selling digital currency from other customers at a price nominated by you. CoinJar acts as an agent by matching your buy or sell instructions with instructions from other customers. CoinJar charges a fee specifically for this matching service.
On 8 April 2016, HMRC published the VAT Finance Manual which included a description of matching services where:
- Platform users are able to offer or insert bids for exempt financial products at specified prices, and
- Platform users are able to accept offers available on the platform (or otherwise insert counter-offers and bids).
The service of matching of bids and offers by a platform operator in order to bring about a trade is exempt under item 5 Group 5 Schedule 9 VATA 94.
As such, VAT does not apply to the fees charged within CoinJar Exchange.
In general, CoinJar is unable to offer tax advice. Please reach out to a tax professional for further assistance.