Allowable costs for CGT
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When calculating the cost of acquisition for CGT on cryptoassets (excluding NFTs), individuals must follow HMRC’s guidance regarding “Pooling”. These rules are the same as those used to calculate the CGT on the disposal of shares.
To find the allowable cost (also known as the CGT base cost) for the CGT computation, the first step is to identify which cryptoassets which have been sold.
The ‘matching rules’ as set out below determine the order in which cryptoassets are deemed to have been sold. On the disposal of cryptoassets, they are first matched with acquisitions:
made on the same day (same day rule), then
made in the next 30 days; on a first-in first-out basis (bed and breakfasting rule) - not including cryptoassets acquired when the taxpayer is non-resident or treaty non-resident in the UK, then
S104 pool - the rest of the acquisitions made on or after 31 March 1982 are aggregated in the S104 pool, creating a pro-rata ‘average cost’ per token in the pool.
Once the deadlines for same day and next 30 days acquisitions have passed, these cryptoassets are also added to the S104 pool.
There is a S104 pool for each type of cryptoasset token held. The pool is an aggregate of all the acquisitions which are not sold within the subsequent 30 days. Therefore an average cost for the cryptoassets in the pool is maintained and a pro-rata cost is deducted from disposals using the matching rules.
HMRC include many ‘pooling’ examples in their Cryptoasset Manual at onwards.
HMRC’s example 5 at CRYPTO22255 below helps to explain pooling and the interaction of the 30 day bed and breakfasting rule with a part disposal from the S104 pool.
In addition to the acquisition cost of the cryptoasset, there are also incidental costs of purchase and disposal that can be deducted in the capital gains calculation.
It is considered that the cost of a subscription to a crypto tax software calculator (such as Recap) can be deducted from the capital gains on the basis that it finds the sterling value for all cryptoasset transactions.
To the extent that the fees relate to advice about the general state of markets or the prospects of particular forms of investment or the management of a portfolio, they are not allowable.
You should not allow a deduction for subscriptions for periodicals or for publications by analysts, stockbrokers or other professional advisers, whether for public or private circulation. Other similar types of expenditure are not allowable.
Accountant’s fees are allowable only to the extent that they relate to the ascertainment of market value of the assets or to any apportionment for the purposes of the computation. Fees for the computation of the capital gains tax liability are not allowable.
It is therefore most likely that for cryptoasset gains, accountant's fees are not allowable.
After a hard fork it is likely that acquisition costs pooled for the original tokens will need to be split across the original and the new tokens. The new tokens will need to go into their own pool.
See further details on how forks affect the allowable costs for CGT purposes below.
HMRC states at that incidental allowable costs include:
HMRC has also set out at which exchange fees can and cannot be deducted from gains as an allowable incidental cost. Our summary on Exchange fees is here:
There is further guidance on allowance incidental costs at , which is not specific to cryptoassets, but sets out costs which do not qualify:
