UK Looks to Tax Second Life Transactions

"HM Revenue and Customs has begun investigating people who are making real-life profits on the life-simulation computer game, Second Life," reports The Independent. Patrick O'Brien, a spokesman for the Revenue, said that users were free to make transactions, but would be taxed on gains beyond their £9,200 annual capital gains allowance. Residents with established businesses will be subject to stricter scrutiny.

"The same tax rules apply to internet trading as to any other form of trading and our compliance approach remains the same," said O'Brien. "It is the core function of HM Revenue & Customs to ensure our customers are aware of their responsibilities and account and pay for what they owe, whether it be income tax, capital gains tax or any other type of tax. Our enquiries cover all areas where non-compliance may occur."

We reported in July about the UK gambling laws' effects on virtual worlds. At that time, those involved in virtual worlds law told us that they believed the Revenue would get involved eventually, but they hadn't seen any signs as of yet.

There's also been a lot of hubub over the the US Joint Economic Committee potentially proposing taxes for virtual goods. After talking to staff members, though, it seems like the Brits are still a year or so ahead of the US in the taxation game. It's important to remember that while the Revenue appears to be actively investigating virtual goods taxation, the IRS hasn't announced any such plan. Instead, the Republican half of the Joint Economic Committee is gearing up to issue a report this month on the subject.

It seems like it'll be a bit longer before we can say the US is ready to move forward on virtual goods transactions.