FTX and Celsius repayments, the UK tax nobody warned you about

The strangest letters of the last three years have been the good ones, collapsed exchanges paying money back. Celsius began distributing to creditors first and FTX followed, both in rounds that are still arriving, and every one of them lands with a question nobody warned recipients about, what does HMRC think this is?

Not a refund. That is the instinct, my own money coming home, and UK practitioners who have examined it are blunt that HMRC does not share it. When your exchange collapsed, your crypto became a claim against the estate, and a claim is itself an asset. Money arriving from it is a capital sum derived from an asset, the territory of section 22 TCGA 1992, and capital sums are chargeable events.

Scenario one, you claimed the loss back in 2022 or 2023

Many people did, through a negligible value claim or a disposal-based loss when the exchange froze. That claim used up your base cost, it is what produced the loss. So a distribution arriving now has nothing left to shelter it, it is chargeable essentially in full. The original claim was still usually the right move, the loss offset gains years ago and money now is better than money never, but the repayment squares the ledger and it belongs on this year’s return.

Scenario two, you never claimed anything

Your base cost is intact, so the distribution is measured against what the trapped assets originally cost you. Most FTX creditors were repaid by reference to November 2022 petition-date values, so plenty of recipients got back less in real terms than they paid in, and where the total received is below original cost the difference is a claimable capital loss. Where it lands above cost, the excess is a gain. Either way the arithmetic needs your original acquisition history, which is exactly the record an imported full history reconstructs.

Scenario three, distributions in kind

Celsius paid partly in bitcoin and ether, and partly in shares of the successor company. The framework does not change, the in-kind assets are the capital sum, valued in pounds on the day they arrived, and they simultaneously start their own tax life at that value, a fresh acquisition in your section 104 pool from day one. Sell them later and the gain runs from the distribution-day value, not from anything in your FTX or Celsius past.

The grievance that is not a deduction

The repayments were computed at petition-date prices, off a November 2022 market that sat far below anything since, and crypto has multiplied from there, so recipients feel underpaid even at “100%” recovery rates. That feeling is legitimate and fiscally irrelevant, tax is computed on what happened, and the appreciation you missed never entered your ownership.

What to actually do

Reconstruct the original cost of what was trapped, decide which scenario you are in, and put the numbers on the right year’s return, distributions are taxed in the year received. Multiple distribution rounds mean the exercise repeats per round. And a caution stated plainly, insolvency-related receipts sit at the edge of settled law, the framework above is the accepted analysis, not personal advice, and a large or unusual recovery is a genuinely good reason to put a specialist on it for an hour.

The app’s part is the memory, your original history imported and reconciled gives every scenario its starting number, computed on your machine, with the working shown.