In response to HMRC’s call for evidence on the taxation of decentralised finance involving the lending and staking of cryptoassets, the CIOT has suggested that the government should undertake a complete overhaul of the legislation and guidance concerning cryptoassets and their recognition and treatment by the UK tax system, for both direct and indirect taxation.
The CIOT expects that unrepresented taxpayers would find the present system difficult to understand and comply with, which is considered to create a significant risk of non-compliance. The existing tax law does not cater well to the unique nature of cryptoassets, largely because of the very large number of transactions that can take place and because so many of them take place without any commercial realisation of the profits arising, the institute said..
The CIOT believes that implementation of any of the three options put forward in this consultation would probably be positive; on balance the CIOT would see option 2 as a front runner, but thinks the government needs to draft new legislation and guidance.
Aside from tax and administration, there is a wider concern that the difficulties around application of tax rules to cryptoassets lies in tandem with lack of sufficient and effective regulation of them. Investments/trading in these assets are subject to little in the way of regulation and providers can liquidate holdings with no notice or recompense.
In response to HMRC’s call for evidence on the taxation of decentralised finance involving the lending and staking of cryptoassets, the CIOT has suggested that the government should undertake a complete overhaul of the legislation and guidance concerning cryptoassets and their recognition and treatment by the UK tax system, for both direct and indirect taxation.
The CIOT expects that unrepresented taxpayers would find the present system difficult to understand and comply with, which is considered to create a significant risk of non-compliance. The existing tax law does not cater well to the unique nature of cryptoassets, largely because of the very large number of transactions that can take place and because so many of them take place without any commercial realisation of the profits arising, the institute said..
The CIOT believes that implementation of any of the three options put forward in this consultation would probably be positive; on balance the CIOT would see option 2 as a front runner, but thinks the government needs to draft new legislation and guidance.
Aside from tax and administration, there is a wider concern that the difficulties around application of tax rules to cryptoassets lies in tandem with lack of sufficient and effective regulation of them. Investments/trading in these assets are subject to little in the way of regulation and providers can liquidate holdings with no notice or recompense.
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