UK CGT – DeFi Lending: Is Withdrawal a Second Disposal?

Tax Questions
#1

Hi, I’m trying to understand the correct UK CGT treatment for DeFi lending under HMRC guidance, using a simplified example.

Scenario:

• I held 1,000 Token A in my Section 104 pool.
• I deposited 1,000 Token A into a lending protocol.
• At the time of deposit, total market value was £300.
• Under HMRC DeFi guidance, this appears to be a disposal because I exchange Token A for a contractual right to repayment.

Later,

• I withdraw 1,002 Token A.
• Total market value at withdrawal is £600.
• I manually split this as:
– 1,000 Token A (principal)
– 2 Token A tagged as reward (income)

Strict interpretation:

  1. Deposit = disposal of Token A at £300.
  2. Withdrawal = disposal of the lending right at £600 (for the 1,000 Token A).
  3. Capital gain on the lending right = £600 − £300 = £300.
  4. 2 Token A taxed separately as income.

Because Koinly does not natively model a “lending right” when no claim token exists, I tried creating a placeholder token (e.g. “NULL”) to represent the position:

Lending:

  • Send: 1,000 Token A

  • Deposit: 1,000 NULL

Withdrawal:

  • Send: 1,000 NULL

  • Deposit: 1,000 Token A

I merged these transactions within deposit and withdrawal. Initially this seemed correct. However, later on Koinly automatically valued NULL at exactly the same market value as Token A on the withdrawal date. As a result:

• The cost basis of NULL was overwritten to match the £600 value,
• The capital gain on disposal of the lending right disappeared,
• The gain/loss was not reflected properly.

So the placeholder approach broke the pooling logic rather than preserving the £300 gain.

Question:

For UK tax purposes, is an approach (deposit disposal + withdrawal reacquisition at the time of withdrawal + reward income) acceptable in practice when software cannot properly model synthetic lending rights? Or should the withdrawal always be treated as a second disposal of the lending right, even if that requires complex manual adjustments? If so, how to structure this on Koinly?

Would appreciate views from anyone dealing with UK DeFi and HMRC guidance in practice.