Consultation on the UK taxation of DeFi transactions
The UK tax authority, HM Revenue & Customs (HMRC), has launched a consultation on the taxation of decentralised finance (DeFi) cryptoasset lending and staking transactions. Under consultation is a legislative change to disregard the disposal of beneficial ownership when tokens are lent or staked in a DeFi transaction for tax purposes. Instead, a chargeable disposal would only arise when the tokens are economically disposed of.
In the briefing available at the link below, David Haworth and Alex Cheetham from our London tax team discuss the proposals in the consultation. It is highlighted that HMRC’s primary aim for better alignment of the tax treatment and underlying economic substance of these transactions is welcomed, but it is queried whether HMRC is missing a trick by legislating only to deal with these specific transactions and not answering some of the more fundamental questions on the tax aspects of cryptoassets.
This article was originally published in Tax Journal on 19 May 2023.