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Where Taxpayers and Advisers Meet

Automated trading accounting for HMRC

Joined:Wed Mar 10, 2021 2:50 pm
Automated trading accounting for HMRC

Postby gavchap » Wed Mar 10, 2021 2:58 pm


I'm considering using some online automated trading software to do some cryptocurrency investments, with the software you give it an investment amount, and a range of prices you want to trade between and it automatically does the buy/sell of the cryptocurrency to exploit the ups and downs of the market (grid trading). What I need to know is what accounting I need to do for HMRC tax purposes. For all intents and purposes, you give the software £x and once you've run the bot for a certain amount of time, or released profits you end up with £x + an amount (hopefully), but the software in the meantime has done 100s or 1000s of individual transactions. Do I need to account for each of the software's individual transactions between currencies, or is it a case of accounting for the initial investment + any profit made from it when you release the profit on that software?


* Month 1: Investment £1000 into ExampleCoin, trading between £1 and £5
* Software makes 500 transactions over 3 months
* Profit released at Month 3: £100

Would I just need to account for starting the bot + the profit taken out, or each of those 500 transactions it did to make the profit, each one could be a buy or sell of the ExampleCoin.

Would the profit from these be income or capital gains?


Joined:Wed Mar 10, 2021 2:50 pm

Re: Automated trading accounting for HMRC

Postby gavchap » Thu Mar 11, 2021 2:59 pm

I actually contacted HMRC about this on their forums too, and got this reply.
Pooling under section 104 Taxation of Capital Gains Act 1992 allows for simpler Capital Gains Tax calculations. Pooling applies to shares and securities of companies and also “any other assets where they are of a nature to be dealt in without identifying the particular assets disposed of or acquired”. HMRC believes cryptoassets fall within this description, meaning they must be pooled.

Instead of tracking the gain or loss for each transaction individually, each type of cryptoasset is kept in a ‘pool’. The consideration (in pound sterling) originally paid for the tokens goes into the pool to create the ‘pooled allowable cost’.

Further guidance on section 104 and pooling can be found here:

Shares and Capital Gains Tax (Self Assessment helpsheet HS284)

Joined:Mon May 24, 2021 5:32 pm

Re: Automated trading accounting for HMRC

Postby HezzilFac » Mon May 31, 2021 7:53 am

Thanks for sharing gav. Do they always answer?

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