Accountant wants to put crypto profits as Trades instead of CGT

My accountant wants to put all of my crypto profits down as trades because I have 330 trades for 2021/2022. Does that make sense? About 2/3s of the profits I made came from 3 assets totalling approx 25-30 trades. However, on my Koinly report most of the profits are shown under CGT instead of Income.

Am I able to distinguish between what could be classed as trades and what should be CGT? If so, how should that be done? He mentioned looking at Badges of Trade which I think I understand but not sure everything should be put in as income.

I live in the UK. Alternatively, any UK tax payers know of any tax advisor who’d look at my koinly report and tell me my tax obligations?

Sorry if this is vague.

Aaron it depends on your tax laws.
In Australia, a trade is the same as capital gains. ie. a successful trade earns you capital gains, unsuccessful trade yields capital losses.
If we hold a asset (with first in first out basis) for over 1 year, in Australia we are discounted our tax payable on the profits by 50%.

I don’t see a difference between a ‘trade’ and a ‘capital gain’ especially if they are under the discount threshold.
You should speak to your accountant to clarify this all for you, but don’t take their word as gospel, research what they tell you to confirm.

This is from the Koinly UK crypto tax guide section 34 - ’ Cryptocurrency trading as a business’ (as a new poster I’m limited in the number of links I can include, but you can find this page on Koinly’s blog or by Googling it):

“Only in exceptional circumstances would HMRC expect individuals to buy and sell crypto assets with such frequency, level of organisation and sophistication that the activity amounts to a financial trade in itself. If it is considered to be trading then Income Tax will take priority over Capital Gains Tax and will apply to profits (or losses) as it would be considered as a business.”

In this case, a trade in crypto assets would be similar to trading in shares, securities, etc. This means that crypto traders can refer to the Business Income manual (BIM56800) (BIM56800 - Financial traders - instruments and shares: contents - HMRC internal manual - GOV.UK) for more information on the relevant approach.

I don’t know all your facts, and cannot provide advice, but I would think that conducting 300 vanilla trades probably does not meet this threshold, especially if this is just a side hobby. I’d suggest that you and your accountant read the BIM from page BIM56850 - Financial traders - instruments and shares: case law and individuals - HMRC internal manual - GOV.UK onwards for a few pages (particularly the case precedents provided, which illustrate the principles nicely and include examples with your sort of level of transactions). They may agree that this constitutes speculation or managing an investment portfolio as an individual, rather than carrying on a trade/vocation.


This topic was automatically closed 60 days after the last reply. New replies are no longer allowed.