UK Tax Authority Defers Crypto Capital Gains Tax on Certain Loans and Liquidity Pool Swaps

The United Kingdom’s HM Revenue & Customs will treat certain disposals involving cryptoasset loans and liquidity pools as no gain no loss, deferring Capital Gains Tax until a user makes an economic disposal of the underlying cryptocurrency, @zerohedge reported.

The measure was published Monday and takes effect 6 April 2027. It applies to individuals and trustees who enter cryptoasset loan and liquidity pool arrangements and amends the Taxation of Chargeable Gains Act 1992.

In a single cryptoasset lending arrangement, a user who acquires or disposes of an interest in exchange for cryptoassets of the same type as those invested will be taxed on a no-gain-no-loss basis. Borrowing arrangements will treat borrowed cryptoassets as acquired at market value at the time of borrowing, with any collateral disregarded for Capital Gains Tax purposes.

For automated market-making arrangements operated through smart contracts, a user acquiring an interest in exchange for the same type of cryptoasset is taxed on a no-gain-no-loss basis.

On exit from liquidity pools, the treatment holds to the extent the user receives the same quantity first invested. Any difference between what was invested and what is received triggers a gain or a loss. The change is expected to affect about 700,000 individuals who engage in these transactions.

HM Revenue & Customs said the measure is not expected to have any significant macroeconomic impact. The current UK regime treats crypto as an investment asset, with selling, swapping, or spending it counting as a disposal for Capital Gains Tax at 18% for basic-rate taxpayers and 24% for higher-rate taxpayers.