Following certain updates to HMRC’s Cryptoassets Manual in February 2022 concerns were raised regarding the application of the current tax rules to DeFi cryptoasset lending and staking transactions.
A particular concern was that the UK tax system can treat DeFi loans and staking as disposals for capital gains purposes notwithstanding that a loan or staking of tokens does not involve a disposal of the economic ownership of those tokens. There could be a mismatch between tax outcomes and the underlying economic substance of transactions and possibly a ‘dry’ tax charge in circumstances where no actual gain has been realised from which to meet the tax liability. Moreover being subject to a chargeable gain on disposal (with the...
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Following certain updates to HMRC’s Cryptoassets Manual in February 2022 concerns were raised regarding the application of the current tax rules to DeFi cryptoasset lending and staking transactions.
A particular concern was that the UK tax system can treat DeFi loans and staking as disposals for capital gains purposes notwithstanding that a loan or staking of tokens does not involve a disposal of the economic ownership of those tokens. There could be a mismatch between tax outcomes and the underlying economic substance of transactions and possibly a ‘dry’ tax charge in circumstances where no actual gain has been realised from which to meet the tax liability. Moreover being subject to a chargeable gain on disposal (with the...
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