RE: UK crypto industry balks at new tax3 Feb 2022 11:56
The UK’s crypto industry is up in arms over new tax rules issued by HMRC on lending and staking assets on decentralized finance platforms.
New rules requiring investors to pay taxes on returns from lending and staking capital on decentralized finance (DeFi) protocols have caused controversy amongst industry experts in the UK. HMRC yesterday issued new guidance which said the rate of taxation owed depends on whether returns are classed as capital or revenue, a thorny distinction which reflects whether the rate of return is decided before or after staking has occurred.
Ian Taylor, the executive body of Crypto UK, criticised HMRC’s approach to crypto taxation which he said is “inconsistent with the approach currently being adopted by Government and other regulatory bodies in the UK” because the tax authority classes digital assets as property for tax purposes.
“This inconsistent approach by HMRC creates friction for crypto investors, adds undue reporting requirements for the consumer, and creates tax compliance confusion. Stock lending is not taxed in the same way, for example,” he said.
Crypto UK also raised concerns that lending or staking assets will be classed as a disposal by HMRC for tax purposes at the moment the tokens leave a users wallet requiring investors to report on the event.
“This treatment of crypto lending and staking creates an unnecessary burden for any crypto investor who will now be required to include details of any lent assets (in certain cases inaccurately determined to be ‘disposed’) on their tax returns and will have to carry out additional reporting which could require individuals to report hundreds or even thousands of transactions,” Taylor said.
“This is out of step with the Government’s stated aim for the UK to be open and attractive as a destination for investment and innovation post Brexit,” he added.
The rule change comes amid a crackdown on crypto assets by the UK’s regulatory community. HM Treasury has issued the UK’s financial watchdog with power to regulate advertisements for unregulated crypto products with the Advertising Standards Agency also labelling digital asset promotions “a red alert” priority.
DeFi refers to crypto protocols which offer a decentralized alternative to traditional financial services. Popular DeFi protocols like Curve and AAVE, let investors earn a return from staking crypto assets to facilitate trades and lending. The space has exploded in 2021 with the total value of assets locked into DeFi projects at almost $80bn according to DeFi Pulse data.
Gov never stop do they :()
Sign In
Follow the stocks
