SolvedCRYPTO61675 | Decentralised Finance: Lending and staking: Chargeable Gains: Examples: Example 5: disposal when a borrower’s collateral is liquidated
From HM Revenue & Customs · Cryptoassets Manual
Lucas holds 100 tokens with a total acquisition cost of £500. Lucas provides the 100 tokens as collateral to a Decentralised Finance (DeFi) lending platform and then takes out a loan.
During the term of the loan, the market price of the borrowed tokens falls. On 01/07/20XX the price of the borrowed tokens falls to the point where a liquidation of some of Lucas’s collateral occurs. 10 of the tokens given by Lucas to the DeFi lending platform as collateral get transferred to a liquidator, along with 1 additional token as the penalty. The tokens have a market value of £6 each at the time of the liquidation.
Lucas’s Chargeable Gains (CG) computation of this disposal will be as follows:
| . | . | £ |
|---|---|---|
| Consideration | 11 x £6 | 66 |
| Allowable costs | Section 104 pool – £500 x 11 / 100 | (55) |
| Gain | . | 11 |
Lucas’s section 104 pool will be adjusted as follows:
| Date | Quantity of tokens | Allowable costs (£) |
|---|---|---|
| Opening balance | 100 | 500 |
| 01/07/20XX | (11) | (55) |
| Closing balance | 89 | 445 |