Crypto tax advisers welcome UK government’s proposed changes to DeFi lending, staking treatment
Tax advisors in the UK have welcomed proposed rules for decentralized finance (DeFi) lending and staking activities, calling it a positive step that provides some “certainty” for the crypto industry.
On Thursday, the UK government’s tax department, His Majesty’s Revenue and Customs (HMRC), announced that it will consult crypto stakeholders over the next eight weeks about the plan.
The new framework proposes that capital gains tax for DeFi lending or staking is only triggered by certain activities – and not for all transactions.
“This is a positive step for the crypto-asset industry in the UK While regulators in the US may appear to create confusion, these moves are aimed at providing certainty for the UK industry,” Dion Seymour, Technical Director of Crypto and Digital Assets for UK Tax service provider Andersen said in an email to CoinDesk.
“We applaud HMRC for being the first tax administration to provide specific rules for DeFi,” Seymour added.
David Lesperance, managing director and tax adviser at Lesperance Associates, called HMRC’s proposal an “excellent result,” in a statement. Meanwhile, lawmaker Lisa Cameron, chair of a cross-party crypto group in parliament, said she was hopeful this would be the first step towards a comprehensive tax framework.
Ian Taylor, board counsel at industry lobby group CryptoUK, told CoinDesk in an interview in July that the crypto industry and its advocates were calling for new crypto tax rules for DeFi lending as the old ones triggered too many taxable events and were “outdated” guidelines. .
But while Lesperance believes this will simplify things for the industry, Seymour does not.
“An opportunity to simplify the rules may have been lost,” Seymour said.
He pointed to another – in his view simpler – option in HMRC’s original call for evidence, which proposed treating the transfer of crypto for lending and betting as “no gain and no loss” transactions, “deferring the tax liability until the assets are financially disposed of .”
Following the authority’s proposed approach – which relies on repo and equity lending rules and would only remove certain lending and wagering activities from the scope of capital gains tax – complicates the tracking of taxable events, according to Seymour.
In its consultation, HMRC said the “no gain, no loss” option would impose a greater administrative burden, while providing less flexibility to accommodate future legislative changes to match new developments in the DeFi world.
Seymour also noted the potential danger of people thinking that there are going to be no taxable events in DeFi.
“The general public who already have very little knowledge of how tax works and are even less likely to actually read HMRC guidance, so the education side is still going to be quite critical,” he said.
