Since HMRC doesn’t seem able to define how liquidity pool taxation should work (can’t say I blame them!), what approaches are people taking? With uniswap v3 the fees are claimable separately, which makes it look like fees should be income and changes to token values (impermanent loss) should be capital gains if liquidity is withdrawn.
However, this seems problematic as I can’t see how any investment should be able to guarantee a capital loss (and considerable income for a uni v3 eth/stable pair for example).
Supplying liquidity is volatile and can easily result in gains or losses when fees + impermanent loss are combined. Hence I suggest it would be reasonable to treat the combined outcome as capital gain/loss and not income. Any thoughts?