CryptoUK responds to HMRC’s draft tax and information-powers measures
CryptoUK has responded to HMRC’s technical consultations on draft legislation covering the tax treatment of stablecoins, cryptoasset loans and liquidity pools, and proposed reforms to civil tax information and inspection powers.
On stablecoins and DeFi, CryptoUK supports the overall direction of travel. The proposed Capital Gains Tax exemption for eligible stablecoins should reduce unnecessary friction for individuals and trustees, while treating genuinely interest-like returns as interest and bringing eligible stablecoins within the corporation-tax loan relationship rules reflects their economic role. We also support no-gain/no-loss treatment for qualifying cryptoasset lending, borrowing and automated market making arrangements where a participant’s underlying economic exposure has not changed.
Our response focuses on making the rules workable in practice. We ask HMRC to maintain a clear, dated list of eligible stablecoins; provide guidance on unlisted assets, changes in eligibility and section 104 pooling; and continue developing worked examples with software providers and industry. We welcome HMRC’s detailed examples to date, while identifying further areas where guidance may be helpful, including complex liquidity positions, wrappers and arrangements spanning commencement.
On civil information and inspection powers, CryptoUK supports targeted powers needed for legitimate compliance checks and international information exchange. However, we do not support the measure in its current form. The proposed scope, including its potential application to tax-software and other non-transactional providers, remains too broad and uncertain.
We ask the Government to withdraw or defer the measure pending clearer boundaries and safeguards. These should include a least-intrusive request sequence, protections for sensitive linked identity and holdings data, an express exclusion for private keys and other controlling credentials, enhanced approval for high-risk requests, and retention of annual reporting on Financial Institution Notices.
Download CryptoUK’s full responses:
- CryptoUK’s response to the technical consultation on the draft legislation concerning the taxation of stablecoins and cryptoasset loans and liquidity pools
- CryptoUK’s response to the technical consultation on reforming civil tax information and inspection powers and modernising the definitions about computer records
Review HMRC’s original policy papers:
- HMRC policy paper on cryptoasset loans and liquidity pools
- HMRC policy paper reforming civil tax information and inspection powers (Schedule 36 Finance Act 2008) and modernising the definitions about computer records (s114 Finance Act 2008)
