| | 1.3 Finance
03. Digital Currency Policy | |
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| 1.3.03 Digital Currency Policy: | | Bit coins, digital currencies and all currencies other than sterling are treated in the same way. Multi-currency accounting is built into every application service, including support for any digital currency. |
| VAT: | | VAT is not charged on currency conversion transactions so any exchange to an from any currency has no VAT implications. Where product-services are provided, then VAT applies on the date and place where the product-service is provided. VAT on goods provided in the UK is at the standard 20% rate of the sterling equivalent on the date the producrt-service is provided. |
| Multi-Currency Accounting: | | To provide multi-currency capabilities, the following data is employed: | | 1. Tax Point Date to record "when" the product-service was provided for taxation purposes. | | 2. Country Code to record the "place" where the product-service was provided for taxation purposes. | | 3. Currency Code to record "what" was paid by the customer for the product-service as provided. | | 4. Exchange Rate to imply the "sterling equivalent" that was paid by the customer for the product-service. | | 5. VAT Percentage (or rate code) to imply the "tax due" on what was paid by the customer for the product-service. | | For trace and trace purposes, the method of payment may also be recorded. |
| Cash Accounting: | | Many alternative accounting methods may be used, but for complete and correct financial account recording, all application services operate to record data using cash accounting rules. This means that every invoice is created on the due tax point date so the invoice transaction date and the date that the product-service is provided is the same. Where an application service is provided for a month, invoicing takes place on the first day of the following month as the tax point date. Where the product-service is cancelled within the first month, then no invoice is created and no payment is due as the product-service was provided free of charge during the first month. | | Invoicing aside, the whole of the accounting system is geared up to record payments in detail - only payments have an effect on commissions and bonus charges. Cash accounting of payments imply that currencies other than sterling are converted to sterling with the exchange rate recorded on the day the conversion is made. Conversion to sterling may be once a month of for each transaction - in all cases the exchange rate used is recorded so the sterling equivalent of the amount paid can be determined. VAT due is a percentage of the sterling equivalent of the amount paid. VAT recording includes the country where the product-service was provided - that countries VAT rate will apply and taxation payments may be made to that country. European VAT is different to all other countries for recording purposes. |
| Capital Gains: | | Capital gains on digital currencies is treated in the same way as any other capital gain. The balance between what was paid and what it is sold for is a capital gain or loss. | | Annual capital gains allowances are in the order of ten thousand pounds. Where gains or losses greater than ten thousand pounds are involved, then full and detailed disclosure is mandated. Where marginal exchange rate fluctuations are involved while transactions are being converted to steling, then capital gains will not be significant. |
| Conclusion: | | Bitcoins are treated in exactly the same way as any currency other than sterling. It is important to record the exchange rate on the day of the transaction so the value of the product-service provided can be determined. Trivial profits and losses that take place while any currency is converted to sterling can be treated as the cost of sale. | | Where any currency other than sterling is retained for a period of time, then capital gain/losses must be accounted for. A capital gain/loss (CG) is simply the difference between what the currency was worth on the day it was bought minus what is was worth when it was sold. It can be of benefit to keep this capital gain within the annual CG allowance. |
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