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Amid the growing uncertainty in the global digital asset market, the U.K government has called for consultation on seeking views on the taxation of Decentralised Finance (DeFi).
UK calls for tax consultation
According to the release, the authority is interested in discovering whether administrative costs could be reduced for taxpayers. It added how tax treatment can be aligned better in line with the underlying economics with transactions involved.
Meanwhile, the call for evidence will be running for around 8 weeks starting from July 5, 2022, to August 31, 2022.
The release mentioned that DeFi lending and staking encloses a range of activities rewarding users who are depositing their tokens into a pool. This call will only allow the issues related to the tax treatment for investors involved in lending and staking. Other DeFi related will not be in the scope of this call for evidence.
It highlighted that out of scope is the tax treatment of transactions entered into by an individual or entity as part of a trade, such as running a platform.
HMRC to hear investors’ advice
HM Revenue and Customs (HMRC) will like to hear recommendations from investors, professionals, and firms who are involved in the DeFi activities. It also includes financial and technology service firms, academic institutions, think tanks tax advisors, and more.
HMRC will likely hold meetings with parties interested to discuss matters related to mentioned topics. However, the time and format of the meetings will be informed later.
It added that any individual having a digital asset and engaging in DeFi transactions will not be considered to be trading.
It should be noted that there will also be no UK tax implications for individuals who are not UK residents but who transact with a UK-based platform, notification highlighted
Earlier, the UK government declared a package of measures in order to ensure their financial service sectors remain in line with the technology. It was done in order to attract jobs and investments.