The British Revenue and Customs Service (HMRC) has published new rules for the tax treatment of encrypted asset loans and liquidity pools, with a view to adjusting DeFi-related taxation as of 6 April 2027. At the heart of the new rule is that, in principle, when a user transfers a token to a smart contract, a mobility pool or as collateral, the capital gains tax is no longer triggered immediately.
This adjustment is aimed at the previously criticized practice. Under the old model, each time a user transfers a token, it may be considered a taxable event, and even if the assets are not actually sold, they may generate a tax burden.
It's taxable when sold.
HMRC introduced the “no gain, no loss” rule. Under the new arrangement, the deposit of encrypted assets in interest-bearing agreements, mobile pools or for collateral use will be considered tax neutral events.
The cases in which a real tax on capital gains is triggered are mainly after “economic disposal”, including the sale of encrypted assets on the exchange, the exchange of encrypted assets in exchange for other assets, or the recovery of more assets from a liquid pool than the initial amount deposited.
Pledges and air drops are still taxed on income
However, the new regulations do not imply that all DeFi income is deferred to tax. The PMRC states that tokens obtained through foundry, mining, airdrops, pledge, interest and incentives will still be considered as income treatment.
Such income will be included in the income tax in the year of receipt. The report mentions that the relevant rates can be up to 45 per cent. In addition, work remuneration in the form of token currency is included in the same treatment.
Since 2027, check the platform's records.
The new regulations will also be implemented in conjunction with more stringent transaction tracking requirements to reduce tax disputes. The United Kingdom committed itself in November 2023 to access the OECD Encrypted Asset Reporting Framework CARF.
Under the current arrangements, as of 2027, the tax authorities will require the encryption platform to provide historical data on transactions to verify that the assets transferred are subject to deferred taxation. Overall, this new set of rules simplifys the filing process for DeFi users and tax authorities, and shows that the UK is trying to balance attracting encryption operations with enhanced compliance.