Tax advisors in the U.K. have recently welcomed the proposed rules for decentralized finance (DeFi) lending and staking activities made by the government's tax branch, His Majesty’s Revenue and Customs (HMRC). The plan suggests that capital gains tax charges for DeFi lending and staking will only be triggered when specific activities occur and not for all transactions.

Dion Seymour, crypto and digital asset technical director of U.K. tax service provider Andersen, declared this as “a positive step for the crypto asset industry in the U.K.”. This policy is expected to bring more clarity and certainty in dealing with DeFi transactions. He also applauded HMRC for being the first tax administration to provide specific rules for DeFi.

Managing director and tax advisor at Lesperance Associates, David Lesperance, deemed the HMRC’s proposal as “an excellent result". He believes that this policy will simplify things in the industry. Nonetheless, Andersen’s Dion Seymour also mentioned the potential chance to make things simpler by following another option from the original HMRC’s call for evidence which proposed treating the transfer of crypto for lending and staking as “no gain no loss” transactions, thus delaying the tax liability until the assets are economically disposed of.

The HMRC already had also identified potential challenges such as the probability of taxpayers not recognizing taxable events or expecting DeFi activities to exempt them from capital gains tax obligations. It is essential, therefore, that the industry works towards educating the public to correctly apply the crypto tax rules.

The U.K. crypto taxpayers can expect to receive more clarity in the coming weeks as HMRC undergoes further consulting with crypto stakeholders over the next eight weeks.



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