If a cryptoasset has become effectively worthless but you still legally own it, a negligible value claim may allow you to realise a capital loss without selling the asset itself.
This article explains how negligible value claims work for cryptoassets, when a claim may be possible, and some of the practical issues investors should understand before making one.
Contents
- 1. What Is a Negligible Value Claim?
- 2. When You Can Use It
- 3. HMRC’s Conditions for Crypto
- 4. How to Make the Claim
- 5. Example: ZDX Token Collapse
- 6. Evidence and Record Keeping
- 7. Practical Issues and Common Misunderstandings
- Conclusion
- References
1. What Is a Negligible Value Claim?
A negligible value claim allows you to declare a deemed disposal of an asset that has become of negligible value, even though you still own it. HMRC often refers to assets "worth next to nothing" as having become of negligible value.
If the claim is accepted by HMRC, the asset is treated as being disposed of and immediately reacquired at its negligible value. This creates a capital loss that you can set against other gains for tax purposes.
In many cases, the deemed disposal date will be the date the claim is made, although it may sometimes be possible to specify an earlier date where the asset had already become of negligible value.
2. When You Can Use It
You can only make a negligible value claim if:
- You still own the asset
- The asset has become of negligible value whilst you owned it
- You can justify the valuation and the date the loss occurred
You cannot make a claim for assets that have been sold or given away, as those scenarios will have triggered their own disposal event. You must still hold legal ownership at the time of the claim.
3. HMRC’s Conditions for Crypto
HMRC accepts negligible value claims for cryptoassets, but a large fall in price alone is not necessarily enough. In practice, claims are usually more relevant where a project has effectively collapsed altogether and there is little meaningful market activity remaining.
Factors that may help support a claim include:
- Very limited trading activity or liquidity
- The project being abandoned, delisted, or effectively shut down
- Worth next to nothing in pounds sterling
- No realistic market remaining through which holders can dispose of the asset
Negligible value claims may also be relevant to assets you have lost access to. For example, where private keys have been lost and there is no reasonable prospect of recovery. You must still legally own the tokens and be able to support the claim with evidence.
HMRC’s guidance also notes that a negligible value claim may become relevant in some theft situations where there is no realistic likelihood of recovering the asset, provided legal ownership still technically continues.
4. How to Make the Claim
You can make a negligible value claim in one of two ways:
- In your tax return, using the capital gains summary pages (SA108)
- In writing to HMRC, clearly identifying:
- The asset
- The amount it should be treated as disposed of (which may be £0)
- The date the asset should be treated as disposed of and immediately reacquired
If HMRC does not accept that the asset was of negligible value on that date, they may propose a different valuation date or reject the claim.
Most individual investors making a claim will normally do so through their Self Assessment tax return by entering “NVC” in box 13.6 to indicate a negligible value claim, and reporting the deemed disposal proceeds, allowable cost, and resulting capital loss in boxes 13.2, 13.3, and 13.5 respectively.
5. Example: ZDX Token Collapse
In 2022, Jamie purchased 10,000 ZDX tokens at £0.80 each. The token was part of a DeFi project that promised long-term staking rewards and utility within its ecosystem.
By early 2024, the project team had disbanded, the website was offline, and there was no active development. The token still appears in Jamie’s wallet but trades for less than £0.00001 with virtually no volume or buyer interest, and no meaningful market remaining for holders trying to sell.
On 5 April 2024, Jamie makes a negligible value claim in their 2023/24 tax return, specifying a deemed disposal value of £0 for the ZDX tokens. This creates a capital loss that can be set against other gains for the year.
In this example, the negligible value claim becomes relevant because the tokens are still legally owned, but they have become of negligible value and there is no meaningful market remaining for them.
6. Evidence and Record Keeping
To support your claim, keep records of:
- The wallet addresses and token quantity held
- Screenshots showing price data around the claimed disposal date
- News articles or announcements showing collapse, delisting, or abandonment
- A brief explanation of why the asset meets the negligible value threshold
For cryptoassets, this often means keeping evidence from around the time the project collapsed rather than trying to recreate it later after websites, exchanges, or social channels disappear.
7. Practical Issues and Common Misunderstandings
A large fall in price alone is not automatically enough to support a negligible value claim. Some cryptoassets continue trading at low prices for years whilst still retaining active markets and speculative value. HMRC may question whether a token was genuinely of negligible value if meaningful trading activity or liquidity still existed at the time of the claim.
Crypto pooling rules can also create complications. HMRC’s guidance states that negligible value claims for cryptoassets apply to the whole Section 104 pool for that token rather than individual units. This means investors generally cannot make a claim for only part of a holding whilst retaining the remainder of the pooled tokens.
For example, if you lose access to one wallet containing BTC but still hold BTC elsewhere, you would not normally be able to make a negligible value claim for only the inaccessible wallet balance.
Timing can also matter. In many cases, the deemed disposal date will be the date the claim is made to HMRC, although earlier dates may sometimes be possible where the asset had already become of negligible value at that point.
You can also only make a negligible value claim where the asset became of negligible value whilst you owned it. If the asset already had negligible value when acquired, an allowable loss will not normally arise through the claim itself.
Conclusion
A negligible value claim is one of the few ways to realise a capital loss on crypto without selling the asset itself. In practice, these claims are usually more relevant where a project has effectively collapsed and little meaningful market activity remains.
Because these claims involve judgement, keeping good evidence and understanding the timing rules can make a significant difference to how the loss is treated for UK tax purposes.
If you are unsure whether your cryptoasset may qualify for a negligible value claim, we can help assess your claim and advise on the best way to proceed.
