UK tax authorities request public consultation on DeFi tax treatment
UK Revenue Authority HM Revenue and Customs (HMRC) opened a public consultation on the tax treatment of DeFi lending and staking on July 5.
Lead Investigator Alex Bosinceanu called on UK DeFi stakeholders to submit evidence for a review on the matter.
“HMRC would like to hear from investors, professionals and companies engaged in DeFi activities, including technology and financial services companies; professional associations and representative bodies; academic institutions and think tanks; and legal, accounting and tax consulting firms.
The consultation period will last two months, from July 5 to August 31, after which a summary of the responses will be published with details of what happens next.
Responses or inquiries can be made to: [email protected]
UK government calls for public consultation on DeFi tax treatment
As a member of FinTech sector strategy, the UK government has expressed its intention to develop closer integrations between crypto-assets and the legacy financial services sector. The overriding objective is to position the UK as a global hub for financial innovation.
Part of this strategy includes forming a clear and appropriate tax treatment for digital assets.
On April 4, Chancellor Rishi Sunak released on government plans to turn the UK into a “crypto-asset technology hub”. Among the goals was a commitment to “improve the competitiveness of the UK tax system” to encourage the development of the crypto sector.
Preliminary findings show that the government is aware that current tax rules do not account for the (sometimes) complicated DeFi staking and lending activity. Specifically, Bosinceanu’s consultation statement highlighted instances where a taxable event has occurred, but the asset has not been disposed of. Thus, unfairly increasing the tax burden of the DeFi investor.
“We were told that there are situations where tax rules treat transactions as transfers where beneficial economic ownership of crypto-assets is retained.”
UK government positive measures
The survey aims to gather evidence on the impact of existing tax treatment on DeFi activity and advise lawmakers on “options to reduce any friction.”
However, the consultation is only for DeFi lending and staking; the lending aspect includes providing bundled liquidity, but not DeFi activities as part of a transaction, such as operating a DeFi platform.
On June 22, the UK Treasury announced it would drop plans to require service providers to collect data on “unhosted wallets” – a move that was met with relief by life advocates. private.
Taken in conjunction with the Defi consultation, it appears Chancellor Sunak is sincere in his attempts to turn the UK into a crypto hub.