HMRC’s recently closed consultation on the taxation of decentralised finance (DeFi) involving the lending and staking of cryptoassets was welcomed by an industry which has long been asking for certainty on tax matters. It set out HMRC’s proposals to introduce legislation to disregard such transactions for relevant tax purposes (in line with the economic substance of the activity) and to introduce a new miscellaneous income charge specifically for cryptoassets. However, as we explained in our response to HMRC, any proposed regime needs to consider other ongoing policy work, be administratively practicable and – given that this is the stated policy intent – actually exempt economic lending and staking transactions.
Further to our article on the background to the consultation, we raised the following points in our consultation response, for further consideration by HMRC.