‘UK taxpayers who believe that being paid in cryptocurrency will provide a tax loophole will be disappointed’
Being paid in cryptocurrency will not provide a tax saving or tax loophole say tax and advisory firm, Blick Rothenberg. Robert Salter, a Director at the firm, spoke to Business Leader regarding the issue.
It has recently been reported that a significant percentage of Lionel Messi’s compensation package with Paris Saint-Germain (PSG) is being paid to him in Cryptocurrency, specifically fan tokens.
If any UK-based football stars – or indeed anybody else – are looking to be partly paid in Cryptocurrencies, they should realize that such methods do not provide a ‘tax loophole’ or ‘tax saving’, for either their clubs or businesses or for them personally, even though under HMRC’s own guidelines – Cryptocurrencies are not officially ‘money’.
UK tax legislation makes it clear that tax is due on someone’s ‘earnings’ – that is ‘money’ and anything which has a ‘money’s worth’. Cryptocurrencies clearly satisfy these criteria.
This includes any salary, wages or fee, any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money’s worth, or anything else that constitutes an emolument of the employment. For clarity “money’s worth” means something that is of direct monetary value to the employee, or capable of being converted into money or something of direct monetary value to the employee.
This means that the payment of part of someone’s earnings in a cryptocurrency would need to be converted to Sterling, using the relevant exchange rate at the time of payment and subject to PAYE at the date of payment. Similarly, the payment of earnings via Cryptocurrency would not provide any NIC savings either. It should still be regarded as earnings for both employee and employer NICs.
It is not clear why Lionel Messi has agreed to take part of his salary in Cryptocurrency – it may be that they do provide some type of tax advantage in France, for example. But any UK-based individuals thinking that they have found a ‘tax loophole’ for PAYE and NIC purposes will be disappointed.