Crypto Assets Tax

Crypto Assets and Tax

Crypto assets are unique in many ways but the tax treatment isn’t. They are treated like shares and other similar assets with similar tax treatment for similar events.

Crypto-Asset                                     Shares                                                  Tax

ICO Initial Coin Offering                 IPO Initial Public Offering             CGT

Forking                                                 Bonus issue                                        Not immediately taxable

Staking                                                 New issue                                           CGT

Salary / Payment                              Salary /Payment                               Income tax

Mining                                                  No equivalent                                   CGT or Income tax

So how do we calculate the tax?

For Capital Gains Tax each transaction is potentially a taxable event.

There are 3 matching rules: TCGA 1992.s.106(A)

  • If an individual disposes of shares, he is first deemed to have sold any shares he acquired on the same day TCGA.1992.s.105
  • Next, the shareholder is deemed to have sold any shares he acquired in the following 30 days. This rule was introduced to prevent the common tax planning practice know as “bed and breakfasting”. TCGA.1992.s.106A(5)
  • Finally, the disposal will be matched with all other share acquisitions which are “pooled” together and for one asset for CGT purposes. This asset is called the “Section 104 pool”

If there are multiple acquisitions in the Section 104 pool, each share in that pool will be treated as having a base cost equal to the average cost of the shares in the pool as at the date of the disposal.

Can you use free software to calculate your annual gains?

Before you do be very careful, remember HMRC have not endorsed any software so far.

What you need is something designed for the UK tax system, ones that offer Fifo, Lifo or mention the  IRS are designed for the US market which is not the same and will give you different results which is why you may well be offered Investigation Insurance.

What should you do?

Simply call for a quote then send a CSV download and have it calculated correctly by a Qualified UK Tax Accountant who knows and understands the rules. For high transaction volumes and large numbers of wallets I use Koinly as my platform of choice.