Crypto Futures - tax calculation of capital gains about bittytax

[cantcodeatall]

One more comment on this:
@nanonano mentioned the list of recognised futures exchanges here: https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg56120
While this list doesn't include any crypto exchange, it also doesn't include any retail CFD provider either. It only lists professional commodity and financial exchanges primarily aimed at institutions. CFDs on the other hand are mentioned earlier in the same manual and are closer to what crypto futures, primarily aimed at retail clients, are:
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg56100

Retail contracts for differences are financial futures, and, unless the profits are taxable as trading income, in almost every case TCGA92/S143 charges the outcomes under the capital gains regime (CG56000+). SP03/02 gives guidance on when profits or losses are to be regarded as trading income.

All debits and credits to the account, including commission and sums equivalent to interest and dividends, are brought within the computation of the net chargeable gain or allowable loss when the contract is closed out.

[nanonano]

That is correct BittyTax does not currently handle futures trades, only spot trades.

As it works today, the buy trade is given a GBP valuation at the time of purchase which is used as the acquisition cost for the section 104 holding of that asset (i.e. ETH).

When the ETH is sold (a disposal) another valuation is made in GBP which gives the proceeds required for the GCT calculation, buy/sell fees are also taken into consideration.

I need to read up on the tax laws for futures, but assume each asset/currency pair would need to be held in a separate pool (not section 104) to calculate the gain/loss correctly?

[Visema]

CAVEAT: I am not a tax expert or an accountant

this is my understanding of how it should work:
Assume same day trade
BUY 3 ETH-USD 25-DEC-2020 FUTURES at 360.00 Commission USD 2.0
Sell 3 ETH-USD 25-DEC-2020 FUTURES at 370.00 Commission USD 2.0

Calculation = (3 * 370) - 2 – (3 * 360) – 2 = PROFIT of USD 26 which once converted into GBP at the relevant exchange rate, say GBPUSD=1.30, equals GBP 20

I believe Same Day, 30d B&B and 104-S rules would still apply

[Visema]

hi just wondering if there is any update on this issue . tks

[nanonano]

I've been reading up on the taxation rules for futures, the consensus is that crypto futures trading is liable for income tax not capital gains. The quote below is taken from here https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg56004.

Profits from transactions in commodity and financial futures dealt in on a futures exchange which is not recognised will be liable to tax as income if the transactions do not amount to trading.

The list of recognised futures exchanges is given here: https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg56120. As you can guess, no crypto trading exchanges are included, maybe that will change in the future.

I'm working on a parser for Deribit which will include a new income type Futures, once that's implemented you can enter your futures profit/loss manually for other exchanges, or additional parsers can be added, out of interest which exchange did you use for your futures trading?

[Visema]

Hi and thank you for your reply I use Binance and Deribit to trade options and futures and will be looking at Coinflex soon as they are the only one that have physical delivery ( the others have vash settlement) will look into the hmrc link carefully and revert back thank you On 29 Dec 2020, at 14:16, Scott Green <[email protected]> wrote:  I've been reading up on the taxation rules for futures, the consensus is that crypto futures trading is liable for income tax not capital gains. The quote below is taken from here https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg56004. Profits from transactions in commodity and financial futures dealt in on a futures exchange which is not recognised will be liable to tax as income if the transactions do not amount to trading. The list of recognised futures exchanges is given here: https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg56120. As you can guess, no crypto trading exchanges are included, maybe that will change in the future. I'm working on a parser for Deribit which will include a new income type Futures, once that's implemented you can enter your futures profit/loss manually for other exchanges, or additional parsers can be added, out of interest which exchange did you use for your futures trading? — You are receiving this because you authored the thread. Reply to this email directly, view it on GitHub<#22 (comment)>, or unsubscribe<https://github.com/notifications/unsubscribe-auth/AQ3CO2RWYWJMBMWD3BG7V5DSXHQDXANCNFSM4QX3Y4CA>.

[cantcodeatall]

I am reading the HMRC link.
It says in the very beginning:

Specific legislation provides that certain disposals which would have been dealt with under the capital gains rules are instead to give rise to income profits or losses. This applies:

for Corporation Tax purposes only, where the futures fall within the legislation in Part 7 CTA09 (Derivative Contracts). (Or previously, within the legislation in FA02 (Derivative Contracts), or FA94 (Financial Instruments)). See CFM50000+. or
in cases where schemes or arrangements involving the use of futures or/and options are designed to give a guaranteed return, see Chapter 12 Part 4 ITTOIA05 and CG56200. (Or previously ICTA88/Sch5AA, which applied also for Corporation Tax until such options and futures were brought within the FA02 rules for derivative contracts.)

Individuals trading in crypto futures fall in neither of the two cases mentioned, so tax treatment should be CGT, not income.

[cantcodeatall]

Also, the freshly released manual gives a bit (pun intended) more clarity:
https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual/crypto20050

In the vast majority of cases, individuals hold cryptoassets as a personal investment, usually for capital appreciation or to make particular purchases. They will be liable to pay Capital Gains Tax when they dispose of their cryptoassets.

Individuals will be liable to pay Income Tax and National Insurance contributions on cryptoassets which they receive from:

their employer as a form of non-cash payment (see CRYPTO21100)
mining, transaction confirmation or airdrops (see CRYPTO21150, CRYPTO21200 and CRYPTO21250)
As set out in CRYPTO20250 there may be cases where the individual is running a business which is carrying on a financial trade in cryptoassets and they will therefore have taxable trading profits. This is likely to be unusual, but in such cases Income Tax rules would take priority over the Capital Gains Tax rules.

[njwedwards]

From what I have read pooling does not apply to CFDs/Futures contracts. The following talking about CFDs (which are essentially the same) was helpful. https://community.ig.com/forums/topic/17087-cfd-and-capital-gains-calculations/