In a policy paper, HM Revenue & Customs (HMRC) proposed treating eligible cryptoasset loans and liquidity pool transactions as “No Gain, No Loss” (NGNL) events for Capital Gains Tax (CGT) purposes.
If implemented, the measure will take effect from April 6, 2027.
The proposal
Under the proposal, depositing cryptoassets into certain lending arrangements or liquidity pools would no longer automatically trigger a capital gains tax event.
Instead, the transaction would receive “No Gain, No Loss” treatment, meaning any capital gain or loss would be deferred until the investor ultimately disposes of the cryptoasset in an economically meaningful transaction.
HMRC said the proposal is intended to align the tax treatment with the economic reality of these arrangements, where investors often retain exposure to the underlying cryptoasset despite transferring it to a protocol.
Why is HMRC proposing the change?
According to HMRC, the current tax rules can create uncertainty because some crypto lending and liquidity pool transactions may be treated as disposals for capital gains tax purposes, even though investors have not effectively exited their investment.
The proposed rules seek to simplify the tax treatment and provide greater certainty for taxpayers participating in qualifying cryptoasset loan and DeFi liquidity pool arrangements.
Who would benefit?
The proposal is expected to apply to:
participating in qualifying cryptoasset lending and liquidity pool arrangements.
The policy paper does not propose extending the rules to every crypto transaction. Rather, the relief is limited to transactions that satisfy the qualifying conditions set out in the legislation.
What does ‘No Gain, No Loss’ mean?
A “No Gain, No Loss” transaction does not exempt an investor from capital gains tax.
Instead, it means the transfer itself is not treated as a taxable disposal. Any capital gain or loss is carried forward and recognised only when the cryptoasset is eventually disposed of in a taxable transaction.
What happens next?
HMRC has published draft legislation and is seeking technical feedback before the rules are finalised. Subject to the legislative process, the government proposes that the changes take effect from April 6, 2027.
The proposal forms part of the UK’s broader efforts to provide greater clarity around the taxation of cryptoassets and decentralised finance activities.
