NFTs – the importance of planning

NFT specialist accountant
Posted 2022 by Chris Davies

Crypto and NFTs. They are new and exciting, but unfortunately that excitement to get moving quickly can lead to some very poor business decisions as we have seen on a number of occasions recently.

A prime example is a young individual who sold successfully some NFTs at the peak of the market for £500k. Only after he had completed the sales did he come to us for tax planning advice.

My first concern was that he had not considered VAT which could potentially cost him 17% of the gross takings if UK VAT applied.

He had also sold these in his own name rather than through a corporate structure so he was looking at potentially 47% income tax and NIC on his profits.

And to top it all, the Bitcoin he was still holding from the sales had lost 30% of its value since he had sold the NFTs.

In all, he had potentially lost 94% of his sales. Whilst there is little we can do as accountants about falling crypto prices, had he come to us earlier we could definitely have set him up in a more tax efficient manner that would have protected far more of his assets.

The simple moral of the story is to seek professional advice and seek it early, so do contact one of our experts if you are thinking of creating NFTs.

On a similar note, you may also like to read our blog on whether to incorporate your crypto business.

crypto accountant UK Chris Davies
Chris Davies – one of our crypto tax specialists

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