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Recap HomeCrypto Tax Guide (Lite)HMRC Cryptoassets Manual
  • A Technical Guide to Cryptocurrency Tax for UK Individuals
    • What are Cryptoassets?
    • Who are Recap?
  • CRYPTOCURRENCY TAX
    • Do I Need to Pay Tax on my Cryptoassets?
    • Which Taxes Apply?
      • Capital Gains Tax (CGT)
      • Income tax
      • VAT
      • Inheritance tax
      • Stamp Duty
    • How Much Tax Will I Pay?
    • New HMRC DeFi Guidance
      • Overview of HMRC guidance
      • 1️⃣Is the Reward Income or Capital?
      • 2️⃣Is Beneficial Ownership (BO) transferred?
      • 3️⃣Consider the Tax Treatment
        • Staker/Lender/Collateral Provider
          • Income Rewards
            • BO transferred
              • ➡️At Point of Entry
              • ⬅️At Point of Exit
              • 💧On Liquidation
              • 💎On Receipt of Income Reward
              • Example 1A
              • Example 2A
            • BO not transferred
              • ➡️At Point of Entry
              • ⬅️At Point of Exit
              • 💧On Liquidation
              • 💎On Receipt of Income Reward
              • Example 1B
              • Example 2B
          • Capital Rewards
            • BO transferred
              • ➡️At Point of Entry
              • ⬅️At Point of Exit
              • 💧On Liquidation
              • 💎On Receipt of Capital Reward
              • Example 1C
              • Example 2C
            • BO not transferred
              • ➡️At Point of Entry
              • ⬅️At Point of Exit
              • 💧On Liquidation
              • 💎On Receipt of Capital Reward
              • Example 1D
              • Example 2D
        • Borrower
    • Investor or Trader?
      • Badges of Trade Limitations
      • HMRC Approach
      • Court Cases involving Financial Traders
    • Capital Gains Tax
      • Calculating the Capital Gains Position
      • Disposal proceeds
      • Disposals to Connected Parties
      • Allowable costs for CGT
        • Exchange fees
        • Forks - affect on allowable costs
      • Capital Loss Claims
    • Income Tax
      • Financial trading income
      • Miscellaneous Income
      • Employment income
    • Fair Market Valuation
  • TRANSACTION TYPES
    • 💷Selling Crypto for Fiat
    • 🔄Trading Crypto to Crypto
    • 🛍️Purchases using Crypto
    • 🎁Gifts
    • 💍Spouse Transfers
    • 🎗️Gifts to Charity, CASCs & Bodies for a National Purpose
    • 🎈Airdrops
    • 🤝Staking
    • 💸Transfers
    • 🍴Forks
    • ⛏️Mining
    • 👛Employment income
      • UK Employer
      • Overseas employer
      • National Minimum Wage (NMW)
    • 🚨Lost & Stolen Crypto
    • 🎲Gambling
    • 💧Liquidity Pools
      • Example - Liquidity pool
    • ⬆️Token Upgrades/Swaps
    • 🔮Cryptoasset derivatives (CFDs, Futures and Margin Trading)
    • 💼Crypto Loans
    • 🔄REPOS
    • 🪞Reflections Rewards
    • 👥Referral Income
    • 💳Cashback
    • 🎨NFTs (Non Fungible Tokens)
    • 🎮NFTs earned playing games
  • Record Keeping
  • Filing Your Self-Assessment
    • How to Register for Self-Assessment
    • How to Fill In the Tax Return
    • Submitting the Tax Return and Paying the Tax
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  • CGT disposal – ‘Marren v Ingles right' to receive capital reward tokens
  • CGT acquisition – capital reward tokens
  • Example

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  1. CRYPTOCURRENCY TAX
  2. New HMRC DeFi Guidance
  3. Consider the Tax Treatment
  4. Staker/Lender/Collateral Provider
  5. Capital Rewards
  6. BO not transferred

On Receipt of Capital Reward

Tax position for lender/staker where CAPITAL REWARDS received and there is NO transfer of beneficial ownership

PreviousOn LiquidationNextExample 1D

Last updated 2 years ago

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This is the tax position upon receipt of the capital reward, where it is not received at the time of exiting the yield generating activity or upon liquidation.

CGT disposal – ‘Marren v Ingles right' to receive capital reward tokens

When the capital reward tokens are received (usually this will be upon exit from the yield generating activity), a capital gains tax calculation is required to adjust for the difference between the estimated and actual market value of the capital reward tokens received.

At the time of entering the yield generating activity, the estimated future capital reward tokens were subjected to CGT. Upon entry, there was also an acquisition of ‘Marren v Ingles right' to receive an unascertainable future quantity of tokens. The acquisition cost of his ‘Marren v Ingles right' is the estimated value of the future reward which has been used in the capital gains tax calculation upon entry.

On receipt of the capital reward tokens, a further capital gains tax calculation is required. The disposal proceeds used in the calculation is the sterling market value of the capital reward tokens at the date of receipt. The acquisition cost is the estimate of the future capital reward, which was made upon entry. Where the estimate upon entry was too low, there will be a further capital gain upon receipt of the capital reward tokens. Where the estimate upon entry was too high, there will be a capital loss upon receipt of the capital reward.

Where the disposal of the ‘Marren v Ingles right’ gives rise to a capital loss, it may be possible to elect to set that loss against any capital gain that arose upon entry. For more information about this election HMRC point you to onwards

HMRC Example 9 at shows the capital gains computation where a loss is realised upon disposal of the 'Marren v Ingles right', at the time of receiving the reward tokens.

CGT acquisition – capital reward tokens

The acquisition cost of the capital reward tokens received is the sterling market value of the tokens at the date of receipt.

When the tokens are subsequently disposed of (let’s say sold for fiat for example), you will only pay further capital gains tax to the extent they appreciate in value between receiving the reward tokens and eventual disposal.

Equally, if they fall in value by the time they are disposed of, a capital loss will be realised. Unless in the same tax year, a capital loss cannot be carried back to reduce any earlier capital gain realised upon entry or exit from the yield generating activity.

Example

See our illustrating the tax position at each point in the lifecycle of staking tokens where there is a transfer of beneficial ownership and capital rewards are received.

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CRYPTO61679
Example 1D