Crypto Staking Income And Expenses

If you stake a crypto token which returns some pre-defined amount of interest rate, so that you are due income tax on the interest which you receive, can you deduct as an expense from that income a transaction fee incurred on the Ethereum network for the running of an 'end stake' smart contract that has to be run to end the stake ?

Hi
As this is interest, you cannot deduct any transaction fees.

This is different from a bank interest. If you don't pay the transaction fee then the interest you receive is zero. There is a cost to getting the interest. That doesn't happen with bank interest where you don't have to pay a fee to receive it, it just comes automatically. Crypto staking does not work like that. In some cases the transaction fee could exceed the staking interest but the user has to incur the fee otherwise they won't get their coins back at all. I don't see how you could get taxed on income you haven't received or on a negative amount of income, whether that income is classed as 'interest' or any other word is used to describe it. Receiving a tax bill for a zero or negative income just doesn't make any sense and I don't think it could be upheld.

HMRC crypto legislation doesn't make sense for most tokens and DeFi products. Simple investing in institutionally backed assets (such as those with an ETF) is very different from most highly volatile, experimental and low liquidity tokens. In these cases getting taxed when exchanging them for fiat seems the logical way forward.