Bed and breakfasting and swapping one coin for another for 30 days..? Please advise!

[Linda]

Hi all.

I would really appreciate some advice. I have been buying a host of coins over the past year or so and some have made some decent gains. I am thinking that I want to be in a position to realise some of those gains for this years capital gains tax allowance.

There are two coins in particular I am looking to sell for profit or realise. And they are Erg and Ada.

Now, Erg and Ada soon will have a dex coming out to swap one coin for the other. Am I right in thinking that I can swap the value of £10k Erg for £10k of Ada and that will be considered a taxable event as if I am realising 10k of my yearly allowance?

Q1) Is the above correct, and secondly, would Koinly identify this as me realising 10k of my capital gains allowance for the year? I know that doesn’t include my cost basis but let’s say I spent £1k sterling for the now £10k value)

If I were to buy back £5k Erg for £5k ADA after 30 days, is this fine to do, and be a singular trade? For reporting purposes when I do eventually sell that Erg in let’s say 5 years time, would I only need to essentially declare that i bought £5k Erg for the equivalent of £5k ADA and the proof will be the DEX report (hopefully integrated with Koinly?)

Q2) Is this correct? And will Koinly identify me swapping £5k ADA for £5k ERG as it being at an At cost basis? (I.e no unrealised gains, until it either appreciates in value or decreases?) Also would I need to show how I got to that point of having £5k ADA to swap for that Erg or is that irrelevant, it would just be considered as “cash” almost?

I then want to potentially realise some of those gains back into my bank, so let’s say this year I send £5k ada to Coinbase and transfer as sterling to my bank account is this fine to do without problems arising?

Q3) Would Koinly accurately identify that the £5k ada I send to Coinbase was the realised gain for this financial year, and treat it as such? And me converting it to sterling and withdrawing accurately show that I took that £5k out of my portfolio into my bank account?

Sorry for the horrible wording i’m using, it’s just so overwhelming thinking about all of this and I want to be sure i’m doing things right. I don’t want to have a nightmare in the future when I do try to sell, so want to neaten my situation up now so I can just hold without worry.

Thanks so much

[sraftery]

It sounds very complex indeed, and I have had a similar story over the last year since I started crypto investing in May 2020.
I would strongly suggest you get an accountant who can help you with your tax return. I assume you pay tax in the UK: if so, HMRC are very strict about proper declarations of crypto transactions.
If you make sure that all your exchange accounts are linked into Koinly, and any cold wallets are also linked, then your Koinly report should be enough information to give your accountant, who can then confirm the tax liability.
You must, must, must declare all your crypto history to your accountant. HMRC are very aggressive in pursuing tax evaders, and it is no excuse to tell them that it is complicated. If you have a Coinbase account, the Coinbase will have already notified HMRC of your account, so they will be expecting some kind of crypto declaration, and if you do not include that, they will almost certainly investigate you, and you do not want that happening.
An accountant might charge somewhere in the £200-£500 for your tax return, and this charge is itself tax deductible, and it is well worth it for keeping you out of trouble with the Tax people.

As for your questions, Q1 is a qualified Yes, swapping Erg for ADA is a taxable event. If you have linked your crypto history into Koinly, then the program will calculate your cost basis; if not, then it will assume a cost basis of zero, and you will get no allowance for how much you paid.

Q2 is again a qualified Yes, but HMRC does not care whether your purchase of Erg was paid for by selling ADA or by depositing £, it is the £ value of the purchase that matters.

Q3 again a qualified Yes, but it will only be seen as such if you import all your wallets into Koinly
The reports feature in Koinly will generate the information needed by your accountant.