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Your crypto tax and accounting questions answered


A panel of experts from the world of crypto tax, accounting and technology tackled viewers’ questions during a recent webinar.

17th Aug 2022
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This year’s self assessment season saw many accountants fielding questions from new and existing clients on how to manage their affairs when it comes to cryptocurrency, and the recent crypto dip has only added further complexity to the picture.

In such a new and potentially complex field, accountants are naturally keen to make sure their knowledge is up to date and they have the right tools and systems in place – particularly if they are looking to start offering crypto tax services.

To help with this, a panel of experts from the world of crypto tax, accounting and tech tackled viewers’ questions during a recent webinar on the treatment of cryptoassets, supported by Koinly. 

Below is a sample of viewers’ questions answered by panellist and partner at PKF Francis Clark Chartered Accountants Ben Lee

You can access more information on the questions below and watch the full webinar on demand by clicking here and registering your details: How accountants can deal with clients with crypto assets


Q: Let’s say I bought BTC [Bitcoin] and then exchange it for ETH [Etherium]. Are there any tax implications? If yes, what is taxed in this case?

A: This would be a disposal of BTC and an acquisition of ETH. These are two separate asset classes, so it is possible there may be a capital gain or loss on the disposal of BTC – providing this transaction is part of investment activity and not a trade.

Q: If clients do not have a detailed log, do some platforms provide a transaction listing as a bank account does?

A: Platforms such as Koinly will scrape the data from transactions between exchanges as well as wallets that individuals use to hold their crypto. They will then be able to put together a detailed log of transactions, which may still need some fine-tuning.

Q: When does investing become trading? Is it anything to do with the frequency of trades?

A: This can be even more subjective in crypto. The badges of trade need to be considered, as they would in any determination of a trade.

Q: What would be the best process when transactions are held on an exchange that is now no longer active and the client cannot access their transactional history? Is it only when a profit/loss is crystallised that a self assessment should be prepared?

A: It may still be possible to get transactional history from wallets that clients use if they transferred their tokens from exchanges into non-custodial wallets. However, it may be possible that they undertook a number of transactions on the exchange that may have given rise to tax implications. But if that exchange is no longer active, then it is likely those details will never be found. Self assessment becomes relevant when the usual capital gains criteria are met, or if receiving crypto in the course of a trade.

Q: For convenience, my client opened a wallet in their personal name. Can this now be assigned to a limited company? If so, what procedures should be used so that HMRC is happy with this?

A: A wallet is simply an identifier on the blockchain – an address that has certain assets attributed to it. It is possible to assign this to a company, in the same manner that other assets can be contributed to a company, and would suggest the relevant documentation is drafted accordingly. I would also look out for any gains that might crystalise on transferring to a limited company.

Q: If a client receives cryptocurrency instead of cash for doing some work. what would the tax be if a person is self-employed or a company? The client intends to keep the cryptocurrency and not dispose of it.

A: Receiving crypto in return for goods or services is a taxable event, the value would be the value of the crypto once received. If the client then held onto the cryptocurrency and disposed of it at a later date, there would be further capital gains implications.

Q: But the transaction hasn’t been realised – so no cash until liquidated or is HMRC now accepting crypto payments for tax?

A: HMRC does not currently accept crypto for payments in tax, which highlights some of the difficulties with dry tax charges arising when swapping between digital assets.

Q: What is the future especially to protect yourself against a situation that UST [collapsed crypto firm TerraUSD] had?

A: Crypto is a high-risk investment and can be incredibly volatile. The situation with UST could be considered a black swan event in crypto – a stablecoin, designed to hold its value, failed, and crashed the market with it. The only advice I can provide is to do your research on a project, ensure that you are happy with the risks associated, and never invest more than you are willing to lose.

Got crypto investor clients? You can request a strategy session with Koinly’s crypto tax advisors by clicking the link here: Book a strategy session with Koinly.

Replies (11)

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By Hometing
17th Aug 2022 13:22

Headache intensifies nevertheless

Thanks (1)
By Hugo Fair
17th Aug 2022 16:11

"never invest more than you are willing to lose" ... because that's more than likely to transpire.

Thanks (1)
By listerramjet
18th Aug 2022 10:37

has the fact that crypto is a currency ever been tested against HMRC's interpretation of them for tax rules?

Thanks (0)
Replying to listerramjet:
By jackpot
19th Aug 2022 08:38

Not yet!

I expect as the likes of Bitcoin start to be accepted for payment in more usual places, someone will take a case to tribunal.

Thanks (0)
Replying to jackpot:
By Hugo Fair
19th Aug 2022 21:38

Blimey, if those pigs fly any lower then they'll crash ... Ohh!

Thanks (1)
By Leopold Stotch
18th Aug 2022 11:13

"The situation with UST could be considered a black swan event"

I think that is a statement that might come back to haunt this expert. The amount of pump-and-dump coins and NFTs in the crypto sphere at present will leave UST looking more like a starling than a black swan. The first of many crypto crashes.

Thanks (2)
By JustAnotherUser
22nd Aug 2022 10:01

I would be interested to gather thoughts on this scenario...

Customer A has done a lot of trading, a lot... 10,000+ of disposals and purchases, DeFi, Staking, lots of losses, minor gains etc etc
99% of its adds up to very little, most of this was a hobby for them, but they had what they call a moon-shot and made £1,000,000 on one coin.

As an accountant would you go through every transaction....

Buy £100 - Sell £110 = gain £10 plus
Buy £500 - Sell £400 = loss £100 plus...
(now add 1,000s more lines in)
Buy COIN £3,000 - Sell £1,000,000 = X (plus all of the above).

Is there a point where you say, nah?

Thanks (0)
Replying to JustAnotherUser:
By Hugo Fair
22nd Aug 2022 22:34

Of course not ... or, to be precise, HMRC won't.

Almost by definition, 'taking a moonshot' means that the activity is highly unusual and unlikely to repeat.
So imagine another Customer B who makes every single trade identically to A *except* for the moonshot one.
They are now one of the vast majority of traders, about whom HMRC aren't likely to say 'oh never mind they're too small to concern ourselves with'!

Thanks (2)
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Thanks (0)
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01st Feb 2023 02:44

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Thanks (0)
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01st Feb 2023 04:28

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