HMRC has today (2 February 2022) updated its guidance on the treatment of crypto and digital assets, specifically for decentralised finance (DeFi) lending and staking in the UK which will significantly alter the way that these assets are classified and treated.
The proposed guidance (link here) stipulates that when a token is lent or staked into a platform or protocol, it may be classed as a disposal by HMRC for tax purposes at the moment the token leaves the users wallet. This means that the transaction will be subject to Capital Gains Tax reporting at that moment, even though control still lies with the user, and they expect that the asset is still theirs and will be returned at a point in the future. HMRC however appears to view this differently.
Commenting on HMRC’s announcement, Ian Taylor, Executive Director of CryptoUK, the trusted voice of the UK crypto industry, said: “HMRC treats crypto assets as property for tax purposes. However, this is inconsistent with the approach currently being adopted by Government and other regulatory bodies in the UK, including the Treasury and the FCA, who regard crypto assets as financial instruments and regulate them as in line with other financial services and products.
Read more details – HMRC DeFI Guidance 2 Feb 2022 - CryptoUK