Tax experts challenge HMRC’s proposed tax framework as 'Not fit for purpose'

CryptoSlate
CryptoSlate

30 Jun 2023 10:47 AM

Accounting service leaders in the UK have disputed HMRC’s proposed taxation framework for decentralized finance (DeFi) transactions, labeling it as “not fit for purpose.” In a letter sent to HMRC, the UK’s tax authority, written by experts, including tax calculation software provider Recap and chartered accountants, Wright Vigar highlights the need for a more nuanced […]...

  • Accounting service leaders in the UK have criticized HMRC's proposed taxation framework for decentralized finance (DeFi) transactions, stating that it is not suitable for the rapidly evolving DeFi sector.
  • They argue that the examples used in the government's consultation do not accurately represent mainstream market activity and demonstrate a lack of understanding of complex transactions in DeFi.
  • The experts challenge the proposed "repo-like" solutions for DeFi taxation, stating that they fail to address the complexities and specifics of crypto assets and the DeFi sector.
  • They also propose treating DeFi rewards as capital with a Nil acquisition cost, rather than classifying them as income.
  • Recap and Wright Vigar suggest an "Asset Composition No Gain No Loss" approach as a potential solution, which involves collecting rights on a per-asset basis and performing disposal calculations based on changes in asset composition.

The sentiment of the article is negative towards HMRC's proposed taxation framework for DeFi transactions. The experts criticize the framework and highlight the need for a more nuanced approach that captures the unique characteristics of the DeFi sector.

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You May Ask

What is the main concern raised by accounting service leaders in the UK regarding HMRC's proposed taxation framework for DeFi transactions?How do the experts argue that the examples used in the government's consultation do not accurately represent mainstream market activity?What alternative approach do Recap and Wright Vigar propose for DeFi taxation?How do they suggest treating DeFi rewards for taxation purposes?What is the sentiment of the article towards HMRC's proposed framework?

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