What is the HMRC guidance on cryptoassets?

The aim of this manual is to help people understand the tax implications that can arise from transactions involving cryptoassets. It is written for HMRC staff but may also assist customers and their professional advisers in understanding HMRC’s interpretation of the law as it relates to cryptoassets as at the date of publication. The content of this manual derives from the positions set out in the policy papers entitled Cryptoassets: tax for individuals and Cryptoassets: tax for businesses, whic

If the return has the nature of income, then it will be within the scope of Income Tax. On the assumption that the transactions are not part of a trade carried on by the customer, the receipt will be within the scope of the miscellaneous income provisions (Part 5 ITTOIA 2005). Sections 687-689 ITTOIA 2005 (known as the “sweep-up provisions”) charge to Income Tax income from any source that is not otherwise charged under or as a result of any other provision of ITTOIA 2005 or any other act. For g

The activities of lending and staking have been particularly popular uses of Decentralised Finance (DeFi). It should be noted that there’s no statutory or legal meaning of the terms ‘lending’ and ‘staking’ in this context. The lending and staking section of guidance (CRYPTO61000) applies to two types of transaction: A person (“lender”) transfers the control of tokens to another person (“borrower”). At the time that transfer occurs, the lender acquires a right to demand that the borrower transfer

If a trade is not carried on by an individual, or the activity which generates the return falls outside the scope of any trade, then the making of a DeFi loan/staking may give rise to a disposal of a chargeable asset (see CRYPTO61600). Where this is the case, Capital Gains Tax will apply to the disposal. However, in exchange for making a DeFi loan/staking, the lender/liquidity provider will sometimes receive a reward for providing those services. For example, a lender of tokens may charge the bo

Cryptoassets are RCAs if trading arrangements exist, or are likely to come into existence, in accordance with section 702 of the Income Tax (Earnings and Pensions) Act 2003. Exchange tokens like bitcoin can be exchanged on one or more token exchanges in order to obtain an amount of money. On that basis, it is our view that ‘trading arrangements’ exist, or are likely to come into existence at the point cryptoassets are received as employment income. Where cryptoassets are provided in the form of

Lending and borrowing of cryptoassets has been possible since the first cryptoasset, bitcoin, was produced in 2009. The pseudonymous nature of cryptoassets combined with a lack of regulation meant this was potentially a high risk activity for the lender as the borrower might deliberately default on the loan. Early lending and borrowing agreements tended to be restricted to parties that knew each other, such as a company and its shareholder(s). DeFi lending platforms facilitate lending between un

If an individual is considered to be carrying on a trade involving the making of DeFi loans/staking, then the activity that falls within the scope of that trade will be subject to Income Tax under Section 5 of the Income Tax (Trading and Other Income) Act 2005 (“ITTOIA 2005”). Income Tax will take priority over Capital Gains Tax and apply to the profits (or losses) of the trade. If there is a trade involving cryptoassets, those assets may potentially be held as either trading stock or as investm

There is an exemption from the online marketplace definition for online financial marketplaces, DST18700. This applies when more than half of the marketplace’s revenue in the accounting period arises in connection with facilitating the trading of financial instruments, commodities or foreign exchange. HMRC’s view of what cryptoassets are can be found at CRYPTO10100. There are a wide variety of cryptoassets, each with different characteristics. For the reasons detailed below it is unlikely that c

If a company or business is carrying out activities which involve exchange tokens, they are liable to pay tax on them. Such activities include: buying and selling exchange tokens exchanging tokens for other assets (including other types of cryptoassets) ‘mining’ providing goods or services in return for exchange tokens The type of tax will depend on who is involved in the business and the activities it carries out (including whether these activities count as a trade). It is likely they will be l

Tokens are digital and therefore intangible, but count as a ‘chargeable asset’ for Capital Gains Tax if they’re both: capable of being owned have a value that can be realised For more information about what makes an ‘asset’ for Capital Gains Tax purposes, see CG12010. Customers looking for guidance on paying Capital Gains Tax when disposing of cryptoassets can refer to this guidance: https://www.gov.uk/guidance/check-if-you-need-to-pay-tax-when-you-sell-cryptoassets. HMRC expects that buying and

In the vast majority of cases, individuals hold cryptoassets as a personal investment, usually for capital appreciation or to make particular purchases. They will be liable to pay Capital Gains Tax when they dispose of their cryptoassets. Individuals will be liable to pay Income Tax and National Insurance contributions on cryptoassets which they receive from: their employer as a form of non-cash payment (see CRYPTO21100) mining, transaction confirmation or airdrops (see CRYPTO21150, CRYPTO21200