Hi, I notice that koinly considers LP deposits a taxable event. However, curious how are loss and gains calculated based in and out of lp? what do you do with yours, do you just leave it as is? thanks.
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I am applying UK tax law and guidance so I follow Koinly’s position on LP deposits. The position in the UK has been placed in a state of flux by the recent “proposed” new guidance issued by HMRC in Feb 2022. This new guidance is more onerous than previous guidance from HMRC.
Under the new guidance, a transfer of crypto to a liquidity pool is considered a disposal and subject to Capital Gains Tax regardless whether you receive a new token from the liquidity pool. Further, removing liquidity is also seen as a disposal subject to Capital Gains Tax. So you have two capital gains taxable transactions - one when you add liquidity and one when you remove liquidity.
Here is Koinly’s blog discussion of the proposed new guidance issued by HMRC:
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