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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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On this page
  • Airdropped upgrade
  • Possible tax treatment
  • Upgrade mechanism
  • Possible tax treatment
  • Redenomination upgrade
  • Possible tax treatment

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  1. TRANSACTION TYPES

Token Upgrades/Swaps

PreviousExample - Liquidity poolNextCryptoasset derivatives (CFDs, Futures and Margin Trading)

Last updated 3 years ago

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Here are three common scenarios arising for token upgrades/swaps. Let's use an example to consider the scenarios and their possible tax effect.

Token A is upgraded to a newer version of that Token (let's say Token A v2).

Airdropped upgrade

The new Token A v2 will often be airdropped via a second smart contract. The original Token A may or may not continue to exist alongside the new Token A v2.

Possible tax treatment

It is possible the acquisition cost of the original Token A should apportioned between the original Token A and the new Token A v2, pro-rata, in accordance with the market value of each token at the date of the upgrade.

If the original token becomes worthless at the date of the upgrade, then all of the acquisition cost will be moved over to the new token.

Upgrade mechanism

You are required to send the original Token A to a certain address via a second smart contract. More often than not, the original Token A will get burned (destroyed). Under the second smart contract you receive the new Token A v2.

Possible tax treatment

It is possible the acquisition cost of the original Token A will be moved over to the new token, since the original token no longer exists.

However it is possible HMRC may treat this as a disposal of the original token A for capital gains tax purposes.

Redenomination upgrade

An alteration is made to the smart contract underlying the original Token A and it is also renamed Token A v2.

Possible tax treatment

It is possible the acquisition cost of the original Token A will be moved over to the new token, since the new Token A v2 has replaced the original Token A.

There is no specific HMRC guidance on the consequences of a token upgrade, but there is some guidance on transferring tokens between distributed ledgers at .

The specific circumstances of each occurrence need to be examined and it is recommended you seek on the tax treatment.

There is no specific HMRC guidance on the consequences of a token upgrade, but there is some guidance on transferring tokens between distributed ledgers at .

The specific circumstances of each occurrence need to be examined and it is recommended you seek on the tax treatment.

There is no specific HMRC guidance on the consequences of a token upgrade, but there is some guidance on transferring tokens between distributed ledgers at .

The specific circumstances of each occurrence need to be examined and it is recommended you seek on the tax treatment.

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CRYPTO22110
professional tax advice
CRYPTO22110
professional tax advice
CRYPTO22110
professional tax advice