Bitcoin for small business: Navigating Cryptocurrency payments as a business

The cryptocurrency landscape has evolved well beyond speculative investments and trading. Today, numerous businesses are embracing bitcoin as a legitimate means of payment for their products and services. However, this shift towards a decentralised economy brings a distinct set of tax implications that business owners must be well-informed about.

 The foremost question on many business owners' minds is, "Can my business accept payments in bitcoin?" The concise answer is yes, but to do it correctly, you must have the necessary systems and platforms in place to accurately track and report these transactions. Here, we've summarised our top five recommendations:

1. Recognising Crypto as Taxable Income

When you accept cryptocurrencies as payment for goods or services, you must recognise them as income in your financial statements.

Like any other form of income, the value of the cryptocurrency received must be reported on your income tax return.  It is important to determine the cryptocurrency's fair market value in your local currency at the time of the transaction using a reputable cryptocurrency exchange rate.

2.  Crypto as Trading Stock

The critical thing to understand is that, in a business context, crypto received as payment is treated as trading stock. To simplify this, think of it like foreign currency and you are generally familiar with FX gains/losses. Cryptocurrency treatment would be the same.

This means there is no capital gain or loss to consider. When treated as trading stock, crypto doesn't give rise to capital gains or losses. Instead, the emphasis is on the revenue nature of any profits or losses from its disposal.

To report this correctly, properly tracking the value of your crypto trading stock is essential, particularly given the volatility of crypto prices. How you record and report can significantly affect your taxable income. Before you commence using bitcoin as a payment platform we highly recommend you ensure you understand this and the data you need to track to report it correctly.

3. Closing Stock Value

As crypto will be treated as a trading stock asset. The value of the crypto you hold as trading stock at the end of the financial year will be pivotal. Accurate records will determine your closing stock's value, affecting your business's taxable income.

4. Record-Keeping is Essential

Maintain meticulous records of each crypto transaction: the date, the amount, the value in your local currency, and the nature of the transaction.

5. Crypto Payments: Seize the Future!

Accepting payments by bitcoin offers businesses an edge in the modern economy. But it comes with a unique set of tax considerations. Proper understanding and management can ensure you stay compliant while maximising benefits.

Whether you've already started accepting crypto payments or are contemplating doing so, we strongly recommend consulting with a crypto advisor to ensure that you are set up correctly, making tax reporting a straightforward process.

Incorporating these best practices will not only enable your business to harness the potential of bitcoin but also ensure that you navigate the associated tax landscape with confidence and ease.