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Posted Mon, 22 Jan 2024 13:03:04 GMT by
Hello, I had funds (in the form of cryptocurrency tokens) deposited at two cryptocurrency platforms which filed for voluntary bankruptcy during the 2022-2023 tax year. [admin removed details]. The bankruptcy proceedings are being handled in the US court system. As part of their restructuring plans both platforms assigned USD values to the cryptocurrency tokens based on the prevailing market value at the time they filed for bankruptcy (i.e. valuation date was in the 2022-2023 tax year). Any funds that will be returned to me as a creditor will be based on this valuation rather than the market value of the tokens when returns/recoveries take place in the future. The plans have now been approved by the courts (this happened in late 2023). However, the funds are still in the control of the bankruptcy administrators, it is unlikely 100% of these funds will ever be returned to me, and the fraction that will be returned and when that will happen is unclear at this point in time. Also, whilst the valuation can be extracted from the court-approved bankruptcy proceedings, they are not yet reflected in transaction records on the platform websites. Given the above, should I treat the USD valuations in the bankruptcy proceedings as cryptoasset to USD trades for the purpose of my 2022-2023 capital gains/loss calculations? Or should I wait until I'm actually given access to any recovered funds and create taxable events at that time (which will likely be in a future tax year or multiple future tax years)? Thanks
Posted Thu, 25 Jan 2024 11:44:28 GMT by HMRC Admin 20
Hi o101,
You can use the UDS valuations in the bankruptcy proceedings as your 'diposal' price to generate a loss.
Thank you.
Posted Thu, 25 Jan 2024 13:44:32 GMT by
Thank you. Is it appropriate to do this in my 22-23 gains/loss calculations (i.e. year in which the platforms declared bankruptcy and halted customer withdrawals). Or should I be waiting until the tax year or years in which the platforms make recovery payments to creditors and generate tax events in those years?
Posted Mon, 29 Jan 2024 15:22:45 GMT by HMRC Admin 32

You would report in the year of bankruptcy.

Thank you.
Posted Tue, 30 Jan 2024 16:39:24 GMT by
Thanks. If I treat the platform bankruptcy as a disposal in the year the platform went bankrupt how should I treat any recoveries that come my way in future years? Should I treat as income or as capital gain? Does it matter if the recovery is paid to me in regular currency (e.g. GBP or USD) or in cryptocurrency? Can you direct me to any online guidance which is particularly relevant to the questions I have been asking?
Posted Thu, 01 Feb 2024 15:44:33 GMT by HMRC Admin 25
Hi o101,
Please refer to:
CRYPTO22500 - Cryptoassets for individuals: Capital Gains Tax: S24 and negligible value
For information on making a negligible value claim if the platforms have gone bankrupt.
If he receives a capital sum back at a later date, he will be treated as having made a disposal for CG purposes.
Please refer to:
CG12940 - Capital sums derived from assets: s22 TCGA92
CG12945 - Capital sums derived from assets: s22 TCGA92: the charge to tax
It doesn't matter how it's paid to you, it will still be a capital sum received.
Thank you. 

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