Disclaimer: This article is intended as an informative piece. This is not accounting or tax advice. Please speak to a qualified tax professional about your specific circumstances before acting upon any of the information in this article.
If you lose crypto through theft or fraud, it helps to understand how HMRC treats this. HMRC does not consider theft to be a disposal, because you are still regarded as the owner of the stolen asset and as having a right to recover it. This means that, as a victim of theft, you cannot claim a capital loss for the stolen crypto. You can read HMRC's position in its Cryptoassets Manual.
The position is similarly strict if you have been defrauded. If you paid for crypto but never actually received it, you have nothing to dispose of, so you may not be able to claim a capital loss.
A negligible value claim is a separate route, and it applies to crypto you genuinely own that has since become worthless. It is not an alternative way to claim a loss simply because your crypto was stolen; the asset itself must have become worthless or of negligible value while you owned it. If HMRC accepts the claim, you are treated as having disposed of and immediately reacquired the tokens, which creates a capital loss that you can then report to HMRC. The same route can apply if you lose access to your private keys and there is genuinely no prospect of recovering them. A negligible value claim cannot be made if the tokens were already worthless when you acquired them. HMRC explains the rules for negligible value claims in its manual.
Because these situations turn on the specific facts, we recommend speaking to a qualified tax professional before making any claim.
Need to sort out your crypto taxes? Use Recap, the privacy focused cryptocurrency accounting software to calculate the taxable gain or loss on your cryptocurrency investments!