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

The Investment Manager (Investment Transactions) (Cryptoassets) Regulations 2022 add ‘designated cryptoassets’ 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
  • to the 2022/2023 tax year and subsequent years for income tax.

What are ‘designated cryptoassets’?

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 which is used is that contained in the OECD’s ‘Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard’ which was published on 10 October 2022.

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].