Cryptoassets are a hot topic, but amid the plunging prices of a crypto winter, what’s the position if
you make a loss?
HMRC usually treats holding cryptoassets as a personal investment, rather than a financial trade.
This brings activity within the capital gains tax regime. If you make a loss on your transactions, it
will fall to be treated under the usual capital gains tax loss rules. It would be possible to offset
the loss against other gains in the same or a future tax year, though not to carry it back against
previous years.
Losses are claimed on the tax return, but note, in passing, that the loss crystallises only on
disposal. In HMRC’s words, ‘“disposal” is a broad concept’. It includes sale of cryptoassets; using
them in payment for goods and services; exchanging them for a different type of cryptoasset; and
gifting cryptoassets to someone other than a spouse or civil partner. In certain circumstances, it
may be possible to crystallise losses for tokens that are still owned, if they become worthless
during your ownership. This involves what is called a capital gains tax negligible value claim.
Having appropriate records is the key to dealing with HMRC in any of these areas. You need to be
able to show an audit trail from acquisition to disposal, and we should be pleased to explain exactly
what that means in practice.
Capital gains tax planning is always complex. When superimposed on the new and evolving field of
cryptoassets, it can seem even more so. The importance of having the right information, tailored to
your circumstances, cannot be overstated - so do please talk to us for more advice.