The new rules by UK Treasury aim to make it easier for people to pay taxes while making money from DeFi. Officers believe the new regulation will require less effort for people to transfer taxes.
The way people borrow and lend money on DeFi is being discussed. A new set of rules are coming regarding taxes in the UK. However, people in charge of taxes want to hear what others think about this idea.
The government wants to know what people investing in DeFi (a type of digital money) think about how taxes should work. People working in the field can share their views openly to include in the regulation. According to sources, the organization will seek their input by June 22.
If new rules are passed, people can use special online funds to buy things. Furthermore, they will not have to pay additional funds as they usually do.
This consideration is being put up to define certain criteria that are defined as “DeFi transaction.” For example, if someone uses cryptocurrency in a way that is not considered a DeFi transaction, they may be subject to taxes. Therefore, it is important to establish clear guidelines on what constitutes a DeFi transaction to avoid any loopholes regarding tax obligations.
A “DeFi transaction” must entail the transfer of crypto assets from a lender to a borrower or through a smart contract, where the borrower is required to return the tokens.
When someone lends something to someone, he should be able to withdraw as much as he gave. This is the same as if you have lent a toy to a friend, you want him back after finishing playing with him.
The government is trying to make it easier for those who lend and use digital money to pay their taxes. They want to make a plan that is less confusing for all. They can impose a new fee for people using digital money, so it is not very difficult to find out how much tax is outstanding on them.
The UK Treasury statement reads: “…the new tax framework could treat all DeFi returns as being revenue in nature and charged to a new miscellaneous income charge specific for crypto asset transactions.”
The discussion over tax regulation on DeFi staking and lending is part of the second phase of a five-step process. Once the officers finalize the inputs, they will prepare a legislative draft. After that, it will be implemented and monitored, and finally, reviewed and evaluated for the change.
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