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Airdrops

What is an Airdrop?

An airdrop is when an individual receives an allocation of tokens or other cryptoassets.
For example, tokens are given as part of a marketing or advertising campaign in which people are selected to receive them. Other examples of airdrops may involve tokens being provided automatically due to other tokens being held or where an individual has registered to become eligible to take part in the airdrop.
The airdropped cryptoasset typically has its own infrastructure (which may include a smart contract, blockchain or other form of distributed ledger technology) that operates independently of the infrastructure for an existing cryptoasset.

Tax Treatment of Airdrops

Income Tax

Taxable airdrops - Miscellaneous Income

Airdrops are taxable income if they are received in return for, or in expectation of, the individual performing a service or doing something in return in order to qualify (even just participating in a social media campaign). When taxable, the sterling market value of the cryptoassets at the date of receipt should be recorded on the Tax Return as miscellaneous income, subject to income tax.

Non taxable airdrop - No Income to Declare

HMRC have confirmed that if the airdropped tokens are received without an expectation of, or doing anything in return, and are not received as part of a trade or business involving cryptoassets or mining; there is no income to declare and no income tax to pay.

Trading Income

If airdrops are received as part of a trade or business involving cryptoassets or mining; the sterling market value of the cryptoassets at the date of receipt should be recorded on the Tax Return as trading income, subject to income tax.

Capital Gains Tax

The cryptoassets received as an airdrop will be subject to the capital gains tax regime when they are disposed of, regardless of whether it is treated as taxable income or not upon its receipt. There is likely to be a taxable capital gain upon the disposal of the airdropped token, based on the increase in value since acquisition.
The sterling market value of the cryptoassets at the date of receipt is treated as the acquisition cost for capital gains tax purposes. This is the case whether or not the airdrop is taxable upon receipt.

Airdrops in Recapโ€‹

Recap has been designed from the ground up to work out the capital gains impact of airdrops.
  1. 1.
    Simply connect your exchange accounts or wallets through our automated integrations or enter your data manually via the user interface or CSV file.
  2. 2.
    Recap treats airdrops as an acquisition of cryptoassets based on their GBP market value, there are no taxable events until the cryptoassets are later sold. All GBP valuations of the assets are determined by Recap's own market valuation engine using both foreign and cryptocurrency exchange rates.
  3. 3.
    See the acquisition cost of every airdrop (example below) in the tax tab
Last modified 3d ago