Knowledge Centre

Cryptocurrencies: Negligible Value Claim

Negligible value claims are a legal concept in the United Kingdom (UK) that allows taxpayers to claim a loss on their tax returns if the value of an asset falls to an extremely low value. This type of claim can be made for a variety of assets, including cryptocurrencies. In the world of cryptocurrency, many investors have faced significant losses due to market volatility, and in some cases, the value of their investments has fallen to a point where they may be considered negligible. In this article, we’ll discuss what negligible value claims are, how they can be made for losses on cryptocurrencies, and the tax implications of making such a claim.

What are Negligible Value Claims? 

A negligible value claim is a process by which taxpayers can declare an asset as having a value of zero for tax purposes. This allows the taxpayer to claim a capital loss on the asset, which can be offset against other capital gains or used to reduce the amount of tax they owe. In order to make a negligible value claim, the taxpayer must provide evidence to HM Revenue & Customs (HMRC) that the asset in question has no resale value and is unlikely to have any value in the future.

How to Make a Negligible Value Claim for Cryptocurrency Losses In the case of cryptocurrency losses, the process of making a negligible value claim is relatively straightforward. Taxpayers must provide evidence to HMRC that the value of their cryptocurrency has fallen to such a low level that it can no longer be sold or traded. This can be done by providing the relevant information, such as the date and value of the cryptocurrency at the time it became worthless.

Tax Implications of Making a Negligible Value Claim Making a negligible value claim for cryptocurrency losses can have a significant impact on a taxpayer’s tax bill. By claiming a capital loss on the cryptocurrency, the taxpayer can offset this against other capital gains they have made during the tax year, reducing their overall tax liability. The losses can also be carried forward to offset any future capital gains that arise on the disposal of any capital assets and will not need to arise from cryptocurrency trading. In conclusion, negligible value claims can be a useful tool for taxpayers looking to offset losses they have incurred on their cryptocurrency investments. However, it’s important to note that making a negligible value claim requires careful consideration and expert guidance, as there can be complex tax implications involved. If you’re considering making a negligible value claim for cryptocurrency losses, it’s recommended that you seek the advice of a qualified tax professional to ensure you are fully aware of the implications of such a claim. Contact us today to find out more about how we can help