UK Tax Authority Consults Investors and Companies Over DeFi Taxation

Amid growing uncertainty within the cryptocurrency space in recent times, the UK government is currently seeking views on the taxation of decentralized finance (DeFi) activities.

According to an official announcement on Tuesday, the UK's tax authority, Her Majesty's Revenue and Customs (HMRC) intend to gather evidence on the taxation of DeFi lending and staking.

The announcement stated, "The government is interested in ascertaining whether administrative burdens and costs could be reduced for taxpayers engaging in this activity and whether the tax treatment can be better aligned with the underlying economics of the transactions involved."

Per the announcement, this call for evidence will only be focused on issues related to the tax treatment for investors involved in lending and staking. Other DeFi-related activities will not be included in the scope of this call for evidence.

The HMRC will like to hear the opinions of investors, professionals, and firms who are involved in the specified DeFi activities regarding taxation. Also included in the list are financial and technology service firms, academic institutions, tax advisors, and more.

Meanwhile, the call for evidence is scheduled to run for approximately eight weeks, starting from 5th July 2022, to 31st August 2022. Therefore, those who wish to submit evidence have until August 31st to do so.

The announcement also pointed out that the HMRC will consider holding meetings with parties interested to discuss matters related to mentioned DeFi activities. However, the time and format of the meetings will be informed later based on the response it receives.

Earlier in April, the UK government had outlined a set of initiatives all geared towards ensuring that the country leads the emerging cryptocurrency market. Among this package of measures was considering and addressing concerns about the taxation system to make it work more easily for the crypto industry.

This latest development comes just a few weeks after Her Majesty's Treasury dropped its initial proposal to track private crypto wallets. The UK government is making conscious efforts to turn the country into a technology hub.