The CIOT has welcomed the launch of a consultation which offers the prospect of greater clarity on the CGT treatment of decentralised-finance (De-Fi) lending and staking services for cryptoassets.
Under proposals contained within a consultation document launched on Tax Administration and Maintenance Day (27 April), the government will produce a fresh set of legislation tailored toward the lending and ‘staking’ of cryptoassets on De-Fi platforms.
Currently, the law would treat many of these transactions as being chargeable disposals for CGT, despite the owner not having actually disposed of their interest in the assets. The proposed new approach recognises the reality of this: that the owner retains an economic interest in their asset. The proposals are to disregard CGT on De-Fi transactions and only apply the tax once the asset is fully disposed of.
Returns received as a form of interest, whilst the asset is in the De-Fi platform, will be taxed as revenue and chargeable under a new ‘miscellaneous’ heading specifically aimed at cryptoassets. Currently, such returns could be taxed either as capital or as revenue, depending on the nature of the transaction.
The CIOT has welcomed the launch of a consultation which offers the prospect of greater clarity on the CGT treatment of decentralised-finance (De-Fi) lending and staking services for cryptoassets.
Under proposals contained within a consultation document launched on Tax Administration and Maintenance Day (27 April), the government will produce a fresh set of legislation tailored toward the lending and ‘staking’ of cryptoassets on De-Fi platforms.
Currently, the law would treat many of these transactions as being chargeable disposals for CGT, despite the owner not having actually disposed of their interest in the assets. The proposed new approach recognises the reality of this: that the owner retains an economic interest in their asset. The proposals are to disregard CGT on De-Fi transactions and only apply the tax once the asset is fully disposed of.
Returns received as a form of interest, whilst the asset is in the De-Fi platform, will be taxed as revenue and chargeable under a new ‘miscellaneous’ heading specifically aimed at cryptoassets. Currently, such returns could be taxed either as capital or as revenue, depending on the nature of the transaction.
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