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This query relates to the reporting of capital gains on cryptoassets.
Please can HRMC clarify how to record and report withdrawal fees charged by an Exchange when withdrawing crypto purchased on it to a personal wallet and when these fee is paid in crypto (out of the cryptoasset being withdrawn).
With regards to withdrawal fees charged by an centralized crypto Exchange when transferring crypto purchased on it to a personal wallet and when the fee is paid in crypto (out of the cryptoasset being withdrawn), please can HRMC clarify whether they regard this as an allowable cost or as a taxable event.
This is specifically with respect to the following scenario/points:
* Purchasing crypto on a centralized Exchange using deposited sterling.
* The purchased crypto being held by the Exchange on your behalf, but under their own private key/wallet.
* Withdrawing the crypto to my own personal wallet and the Exchange charging a withdrawal fee for the transfer, which is paid in crypto (out of the cryptoasset being withdrawn)
* The centralized exchange confirming that the purchase of the crypto with my fiat funds is not recorded on the blockchain, only the withdrawal of it to my own personal wallet.
* Awareness that you technically do not own the cryptoasset purchased on the central Exchange until it is withdrawn to your own personal wallet and therefore under your own custody.
In section "CRYPTO22150" of HRMC's Cryptoassets manual, it states the following is an allowable expense that can be offset from capital gains:
"transaction fees paid for having the transaction included on the distributed ledger"
Because of the fact that nothing gets recorded on the blockchain as a result of purchasing the crypto on the centralized Exchange, only from withdrawing it to my own personal wallet, this would suggest I can include the withdrawal fee as an allowable cost when submitting tax returns for capital gains on crypto.
However, from the perspective that the withdrawal fee is paid in crypto (out of the cryptoasset being withdrawn), HRMC states that the disposal of crypto is a taxable event.
There appears to be two conflicting points here and it is unclear to me whether I need to be recording these withdrawal fees (paid in crypto) as an allowable cost or as a taxable event.
Please can HMRC clarify this for me and exactly how to record this.