INTM269079A - Non-residents trading in the UK: through UK investment managers, brokers or Lloyd鈥檚 agents: investment managers - "investment transaction" - transactions in designated cryptoassets

The Investment Manager (Investment Transactions) (Cryptoassets) Regulations 2022 add 鈥榙esignated cryptoassets鈥� to the Investment Transaction List for the purposes of the Investment Manager Exemption.

1(1) confirms the regulations come into force on 1 January 2023, however they apply:

  • to accounting periods which were current on the date the regulations were made (19 December 2022) and subsequent accounting periods for corporation tax, and聽
  • to the 2022/2023 tax year and subsequent years for income tax.

What are 鈥榙esignated cryptoassets鈥�?

2(2)(b) of the regulations state that a cryptoasset is a designated cryptoasset unless it falls within the exclusions which are outlined at 2(2)(b)(i) to (iii).

The definition of cryptoasset聽used in these Regulations is that contained in the OECD鈥檚 鈥楥rypto-Asset Reporting Framework and Amendments to the Common Reporting Standard鈥� which was published on 10 October 2022. Specifically, section IV(A)(1) of the Rules at page 19 in that document states that:

"The term "Crypto-Asset" means a digital representation of value that relies on a cryptographically secured distributed ledger or similar technology to validate and secure transactions".

There is further helpful commentary on this definition at page 46-47 of the same OECD document.

Cryptoassets which are excluded are those which represent rights in respect of:

  • a transaction which would not already fall within the Investment Transactions List
  • property, a transaction in which would not already fall within the Investment Transactions List
  • the provision of services if those rights are exercised while the asset is held by the non-resident.

However, cryptoassets are not excluded if they represent rights in respect of another cryptoasset that is itself a designated cryptoasset.

There is a further exclusion at 2(3) which means that while a transaction may be in a designated cryptoasset, it is not a specified transaction for the purposes of 2(1) meaning that it is not an investment transaction. This is where the designated cryptoasset is created or issued by:

  • the non-UK resident
  • an investment manager acting on behalf of that non-UK resident, or
  • a person connected with either the non-UK resident or investment manager acting on their behalf.

HMRC will be publishing further guidance on these regulations in due course, any technical queries should be directed to [email protected].