How do you pool tokens?
You must group each type of token you own into pools, work out a pooled cost for each type, and keep records for each pool. You do this in the same way that you would pool costs for shares. When you sell tokens from a pool, you can deduct an equivalent proportion of the pooled cost – along with any other allowable costs – to reduce your gain.
You will need to work out the pooled cost every time you buy or sell tokens.
When you buy tokens, add the amount you paid for them to the appropriate pool. When you sell them, deduct an equivalent proportion of the pooled cost from the pool.
Do not group tokens into pools if you buy them:
- On the same day that you sell tokens of the same type.
- Within 30 days of selling tokens of the same type.
If you bought new tokens of the same type within 30 days of selling your old ones, the rules for working out the cost are the same as the rules for shares.
How do you report and pay CGT?
If you need to report and pay capital gains tax, you can either:
- Complete a self-assessment tax return at the end of the tax year.
- Use the CGT real-time service to report straight away.
You must keep separate records for each transaction, including the:
- Type of tokens;
- Date you disposed of them;
- Number of tokens you have disposed of;
- Number of tokens you have left; and
- Value of the tokens in pound sterling.
You should also keep copies of bank statements and wallet addresses and a record of the pooled costs before and after you disposed of them. HMRC might ask to see your records if they carry out a compliance audit.
What about if you are a victim of fraud?
HMRC does not consider theft to be a disposal, as the individual still owns the stolen asset and has a right to recover it. So if you are unlucky enough to be a victim of theft, you cannot claim a loss for CGT. In the same way, if you contract to acquire tokens but then do not receive them, you may not be able to claim a capital loss.
However, if you contract to acquire tokens and receive them, you may be able to make a negligible value claim to HMRC in the event that those tokens become worthless.
I hope this has proved a useful introduction to cryptoassets, but if you want to know more, I recommend HMRC’s Cryptoassets Manual available on gov.uk.
Richard Cooper is a business development manager at The London Institute of Banking & Finance
