Capital gains HMRC form is confusing my tired brain. Please help.

Casseopia123

I wonder if any of you lovely people have a moment to help this idiot out...

I invest in crypto which is taxed under capital gains.

Back in 2019, the rules were unclear so I didn't declare anything (I would have come under the limit that year anyway).

I have a loss for 2019 which I'd like to retrospectively declare now but I'm really struggling with what is probably a really simple question which the form asks as I amend my 2019 self-employed tax return:

Are losses deducted? Their explanation doesn't help me. It says: If losses are deducted from your chargeable gains, choose 'Yes', otherwise, choose 'No'.

If you have allowable capital losses for the tax year 6 April 2019 to 5 April 2020 these are usually deducted from your total allowable gains. Allowable losses brought forward are then deducted, for example, 'used', but only to the extent necessary to reduce your gains, to £12,000, 'annual exempt amount'.

Please explain to me like I'm 5. Are my losses deducted from what? I didn't have any gains that tax year. Is this what they mean? Have I already deducted the losses from any gains in that year? (I haven't)

So confused.

MX5huggy

My first question is have you actually realised any gains or losses this only happens when you sell something. 

Casseopia123

MX5huggy said:

My first question is have you actually realised any gains or losses this only happens when you sell something. 

Hi.

I did not realise any gains in that year - I was only investing. Hence the losses I'd like to retrospectively declare to set against future gains.

I was moving crypto around though and some did appreciate in value but the end result of all the calculations for that year was an overall loss.

cx6

If you have no gains in the current or previous tax years to offset your losses against, then you simply carry those losses forward year-on-year until at some point you have a gain to offset.

https://www.investorschronicle.co.uk/ideas/2021/05/25/can-crypto-losses-save-you-from-a-tax-bill/

lozzy1965

Are gains and losses in crypto crystallised  when the specific token is sold (like with shares - eg.  Buy BTC for £1000, sell for £1300, buy ETH for £1000, leaving £300 in crypto account = £300 gain) or is it when the money in the crypto account is converted back into £ where the 'sale' is deemed made?
I'm not a crypto investor and will probably never be one, just interested.
EDIT:  And might be a relevant question to the op's post.

eskbanker

lozzy1965 said:

Are gains and losses in crypto crystallised  when the specific token is sold (like with shares - eg.  Buy BTC for £1000, sell for £1300, buy ETH for £1000, leaving £300 in crypto account = £300 gain) or is it when the money in the crypto account is converted back into £ where the 'sale' is deemed made?
I'm not a crypto investor and will probably never be one, just interested.
EDIT:  And might be a relevant question to the op's post.

The former - https://www.gov.uk/government/publications/tax-on-cryptoassets is the top-level page for HMRC's approach, and the linked manual includes https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual/crypto22100

CRYPTO22100 - Cryptoassets for individuals: Capital Gains Tax: what is a disposal

Individuals need to calculate their gain or loss when they dispose of their tokens to find out whether they need to pay Capital Gains Tax. A ‘disposal’ is a broad concept and includes:

• selling tokens for money
• exchanging tokens for a different type of token
• using tokens to pay for goods or services
• giving away tokens to another person (unless it’s a gift to their spouse or civil partner)

There is no disposal if the individual retains beneficial ownership of the tokens throughout the transaction, for example moving tokens between public addresses that the individual beneficially controls (commonly described as moving tokens between wallets).

Using a mixer, tumbler or similar service so that the individual receives the same type of tokens that they put into the transaction also is not a disposal. However, it will constitute a disposal if the individual puts token A into the transaction and receives token B in return.

Casseopia123

cx6 said:

If you have no gains in the current or previous tax years to offset your losses against, then you simply carry those losses forward year-on-year until at some point you have a gain to offset.

Thank you for your response (the article you linked was behind a paywall unfortunately)

Yes I would like to carry that loss forward. But to do so, I need to go back to that tax year and state that loss which I'm in the middle of.

But the question: Are losses adjusted? is confusing me and I don't know what it means or how to answer it...

masonic

If your gains are £0, and you have not deducted any losses, it would make no sense to answer 'Yes' to the question "Are losses deducted?". Presumably the Yes/No answer will affect the calculation of net gains, but if gains are zero I doubt it will make any difference.

Casseopia123 said:

I was moving crypto around though and some did appreciate in value but the end result of all the calculations for that year was an overall loss.

Does this not then mean that you have gains and losses to report?

Casseopia123

masonic said:

If your gains are £0, and you have not deducted any losses, it would make no sense to answer 'Yes' to the question "Are losses deducted?". Presumably the Yes/No answer will affect the calculation of net gains, but if gains are zero I doubt it will make any difference.

OK so we'e getting somewhere. I just looked again at the summary for the year - I had gains (£222) but overall, when all the calculations were made, it was an overall loss.

Apologies I should have said this.

Should I answer differently, knowing this?

I am SO confused!

cx6

a non-adjusted gain or loss is the difference between what you paid for an asset and and what you sold it for.

this can then be adjusted eg if you spent money on the asset eg getting it cleaned or repaired, also purchase and sales fees etc

masonic

Casseopia123 said:

masonic said:

If your gains are £0, and you have not deducted any losses, it would make no sense to answer 'Yes' to the question "Are losses deducted?". Presumably the Yes/No answer will affect the calculation of net gains, but if gains are zero I doubt it will make any difference.

OK so we'e getting somewhere. I just looked again at the summary for the year - I had gains (£222) but overall, when all the calculations were made, it was an overall loss.

Apologies I should have said this.

Should I answer differently, knowing this?

I am SO confused!

I would suggest you report the total gains in the appropriate box, report the total losses in the appropriate box, answer that losses are not deducted from gains.

Check all is correct in final calculation and pdf of the submission (which has clearer headings btw).

You are using these to follow along, yes?...

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/787347/sa108_notes_2019.pdf

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/787346/sa108_2019.pdf