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Key takeaways: what to know in 1 minute
- VAT may apply to broker fees: Fees charged by UK crypto brokers for non-exempt services are subject to VAT at the standard rate unless a specific exemption applies.
- Exempt supply test matters: Pure exchange services (crypto↔fiat swaps) can be financially exempt under HMRC reasoning; commissions, custody and ancillary services often remain standard-rated.
- Registration threshold applies: A crypto broker must register for VAT if taxable supplies exceed the UK VAT registration threshold (currently £85,000 taxable turnover in 12 months) or if making taxable distance sales into the UK by non‑UK suppliers.
- Place of supply rules affect cross‑border trades: The VAT liability on fees depends on where the customer belongs (B2B vs B2C). B2B services to EU/overseas VAT‑registered businesses usually attribute place of supply outside UK; B2C customers generally trigger UK VAT.
- Practical steps: Implement invoice templates, split fees from spreads, track customer status, and seek recorded legal advice where models are mixed (broker + market‑maker + custody).
Why this matters now
Concern over VAT on crypto brokers is widespread because many platforms mix exchange, custody, advice and execution services. Small differences in contract wording, flow of value and client type can change VAT outcomes and cashflow materially. The following guide focuses exclusively on VAT on crypto brokers in England and UK law, offering practical rules, worked examples, a compliance checklist and templates for fees and reporting.
Is VAT charged on crypto broker fees in uk?
How HMRC frames the question
HMRC's public guidance in the tax collections for cryptoassets notes that the ordinary VAT rules apply where supplies are made for consideration. For crypto brokers this means examining whether the service supplied is taxable (standard‑rated), VAT‑exempt (e.g. certain financial services), or outside the scope. The crucial points are the legal character of the supply and the contractual/operational reality.
Which broker fees are likely to be standard‑rated
- Commission for arranging trades where the service is not a recognised financial exchange service. If the broker's fee is essentially payment for an execution or intermediation service that does not fall within statutory exemptions, standard‑rated VAT applies.
- Subscription fees for access to a trading platform that provides helpful non‑financial functionality (analytics, charting, account management) are typically standard‑rated.
- Custody and safekeeping services for private keys or accounts are usually standard‑rated unless they are part of a wider financial service that is explicitly exempt.
Which broker fees can be exempt or outside scope
- Pure exchange of currency for consideration: HMRC treats the exchange of money for crypto (and vice versa) as similar to exchanging currencies in certain cases; where the supply is a financial service captured by exemptions, VAT may not apply. This commonly affects spreads on crypto↔fiat trades executed as exchange services.
- Transmission of money and regulated payment services may be outside the scope of VAT.
Practical determination test
- Identify the contractual promise (what does the customer pay for?).
- Map the operational flow (who executes, who holds the asset, who risks market movement?).
- Compare to HMRC's examples and UK statute: if the service mirrors a financial exchange or financial intermediation it may be exempt; if it supplies technology, custody or execution without the hallmarks of a financial exemption, VAT is likely chargeable.
When do crypto brokers need VAT registration?
UK registration thresholds and triggers
- Compulsory registration once taxable supplies exceed £85,000 in any rolling 12‑month period. Taxable supplies exclude VAT‑exempt supplies; therefore, if the broker's income is largely from exempt exchange fees, turnover for VAT registration may be reduced.
- Voluntary registration is available and sometimes beneficial (to reclaim input VAT), but introduces administrative and pricing consequences.
Special situations that trigger registration
- Mixture of taxable and exempt supplies: If a platform supplies both taxable and exempt services, the broker may still need to register for partial exemption rules and make adjustments to recoverable input VAT.
- Non‑UK brokers supplying B2C services to UK customers: Place of supply rules can create UK VAT obligations where the final consumer is in the UK; non‑UK suppliers may need to register under UK rules.
Practical checklist to decide registration
- Categorise revenue lines by VAT treatment (exempt, standard, outside scope).
- Build a 12‑month rolling forecast segregating UK taxable turnover.
- If taxable turnover approaches £85,000, prepare to register and implement VAT on invoices and reporting.
How HMRC treats exchange services for crypto
Exchange services: definitions and HMRC stance
HMRC evaluates whether a service amounts to an exchange (a facility that enables sellers and buyers to exchange assets) or simply a brokerage/intermediation. The distinction matters because certain financial exchanges and transactions in money are outside VAT or exempt.
Key indicators HMRC uses
- Is the platform acting as an order book/market operator or merely matching and executing on behalf of clients?
- Does the platform own the asset or take principal risk? Proprietary trading by the platform can change the VAT classification of its income.
- Are crypto assets treated legally as money equivalents for the specific operation?
Examples and outcomes
- Platform A charges a small commission per executed trade where it never owns assets and matches orders: commission may be taxable unless the nature of the execution is proven to be an exempt financial service.
- Platform B operates an exchange where participants' trades settle through the platform and fees are charged centrally: HMRC may view certain fees as outside scope or exempt if they meet financial exchange characteristics.
VAT vs exempt supplies: tokens, wallets and exchanges
How to separate supplies in practice
Treat each deliverable as a separate supply for VAT analysis.
- Tokens (supply of crypto itself): the sale of crypto assets is not a supply of goods or services in the traditional VAT sense and HMRC's guidance focuses on the nature of the transaction around tokens. When tokens are consideration for another supply, the VAT treatment follows the supply made.
- Wallet services (custody): likely standard‑rated as a supply of safekeeping unless integrated into an exempt financial activity.
- Exchange connectivity (market access): may be exempt if part of a financial exchange, otherwise standard‑rated.
Table: typical broker charge vs likely VAT outcome
| Charge type |
Typical operation |
Likely VAT treatment |
| Commission per trade |
Intermediation; no principal risk |
Standard‑rated unless falls within a financial exemption |
| Spread on crypto↔fiat |
Price difference in exchange transactions |
Often exempt if treated as exchange of currency/financial service |
| Custody / wallet management fees |
Safekeeping private keys and account administration |
Standard‑rated in most structures |
| Subscription / SaaS access |
Platform analytics, reporting, access |
Standard‑rated |
Determining place of supply for cross‑border crypto trades
Why place of supply matters
Place of supply rules determine whether UK VAT applies to a given service. For brokers, the rules hinge on whether the supply is B2B or B2C and where the customer belongs.
B2B vs B2C: quick rule
- B2B services: Place of supply is where the customer belongs (often outside the UK). Supplier issues a VAT‑free invoice with the customer's VAT number (apply reverse charge if EU/UK specifics require). Require evidence of the customer's business status and VAT registration where applicable.
- B2C services: Place of supply is where the supplier belongs (UK) for most services to non‑business customers — therefore UK VAT applies.
Practical evidence requirements
- Maintain verified business credentials for B2B customers (company registration, VAT number where relevant).
- Log IP, billing address and contractual terms for B2C customers to support place of supply.
Example: non‑UK exchange charging UK retail clients
If a non‑UK broker supplies access and charges subscription or commission to UK consumers, UK VAT is chargeable on those services and the non‑UK broker must consider UK registration or appoint a UK VAT representative where required.
Practical VAT compliance for UK crypto brokerage platforms
Operational steps to control VAT risk
- Segregate revenues by fee type in ledgers: commissions, spreads, custody, subscription, interest/rewards.
- Price display: show VAT‑inclusive pricing for UK B2C customers if VAT is charged; for B2B show net prices with VAT shown separately.
- Invoicing: include clear descriptions, VAT amount, supplier VAT number and, where B2B, the reverse charge statement if used.
- Accounting systems: map each revenue code to VAT treatment in the accounting platform; tag customer records with business/consumer flag and country.
- Input VAT recovery: where platform supplies both exempt and taxable services, apply HMRC partial exemption rules and maintain allocation methodology.
Worked example: commission calculation and VAT liability
- Trade commission charged to a UK consumer: £10.00 commission + VAT (20%) = £12.00. VAT due to HMRC = £2.00.
- If the same £10.00 is a fee for an exempt financial exchange service, VAT might not apply and the broker keeps full £10.00, but cannot reclaim input VAT attributable to that exempt activity.
Compliance checklist for platforms
- Register for VAT when taxable turnover approaches threshold.
- Create separate SKUs/invoice lines for spreads, commissions and custody fees.
- Implement KYC fields that record business vs consumer status and VAT numbers for B2B reliefs.
- Keep contract terms matching operational reality (avoid describing proprietary positions as agency if risk lies with platform).
- Maintain documented allocation method for input VAT recovery (partial exemption) and review annually.
Risk scenarios and mitigation
- Risk: Ambiguous contract wording that suggests platform acts as principal. Mitigation: Clarify that platform acts on behalf of clients where true; document segregated client accounts and settlement procedures.
- Risk: Mixing exempt exchange fees with taxable custody services without tracking. Mitigation: Invoice separately and code ledger lines to VAT treatment.
- Risk: Non‑UK platform attracting UK retail customers without accounting for VAT. Mitigation: Add VAT engine on checkout and review threshold triggers for registration.
flow to determine VAT on a broker fee
VAT decision flow for a broker fee
🔎 Step 1 → Identify the contractual promise (execution, custody, exchange)
🏷️ Step 2 → Classify as taxable, exempt or outside scope
🌍 Step 3 → Determine place of supply (B2B vs B2C)
📄 Step 4 → Invoice accordingly (VAT shown or reverse charge)
✅ Step 5 → Record in ledger and apply input VAT recovery rules
Advantages, risks and common errors
Benefits of a correct VAT approach
- ✅ Cashflow certainty: accurate VAT treatment avoids unexpected liabilities and penalties.
- ✅ Credibility with institutional clients: correct invoicing and VAT handling aids B2B relationships.
- ✅ Input VAT recovery: where taxable supplies exist, reclaiming input VAT reduces costs.
Common errors to avoid
- ⚠️ Treating spreads and commissions as the same for VAT purposes without legal analysis.
- ⚠️ Failing to separate taxable and exempt lines on invoices.
- ⚠️ Relying on informal operational descriptions rather than documented processes when audited.
Frequently asked questions
Frequently asked questions
Is VAT charged on broker commissions for UK retail clients?
Yes. Commissions charged to UK consumers are usually standard‑rated unless the service clearly qualifies as an exempt financial exchange under HMRC rules.
Are spreads on crypto↔fiat trades subject to VAT?
Spreads may be exempt where they effectively represent a financial exchange; however, the exact treatment depends on the nature of the transaction and the platform's role.
When must a non‑UK broker register for UK VAT?
A non‑UK broker must register if supplying taxable B2C services to UK consumers and has UK taxable turnover above thresholds, or if UK law requires registration for specific services.
Only if the custody service is used to make taxable supplies; where supplies are exempt, recovery is restricted and partial exemption rules will apply.
No. HMRC examines the economic reality and contract. Two platforms with similar outward services can receive different VAT treatments depending on risk allocation and operational facts.
What records should brokers keep to support VAT treatment?
Keep copies of contracts, invoices, customer business status, settlement records and technical logs showing execution and custody flows.
Are marketplace models treated differently from agency brokers?
Yes. Marketplaces that operate a multilateral trading facility can fall into different VAT categories compared with agency brokers who only introduce counterparties.
Conclusion
Your next step:
- Review and classify all revenue lines into taxable, exempt and outside scope categories and update the ledger.
- Implement invoice templates that separate fees (commission, spread, custody) and record customer status (B2B/B2C) with evidence.
- Consult a VAT specialist to confirm the classification of anything described as an "exchange" and prepare for VAT registration if taxable turnover approaches £85,000.