I am sole trader (not VAT registered), I am selling within UK, but also I sold some stuff to one of the EU countries where I have opened bank account in foreign currency. My customers paid money in their currency straight into my foreign bank account. I converted money on the date of sales in my books. Most of the money I transfered into UK bank account, but not all of them.
For example:
Let say I sold for 1000 euros - recorded it in pounds using HM Revenue exchange currency rates, and it was 822 pounds.
Then I transferred 500 euros into UK bank account - I received not 411 pounds (as I had in my books) but let say 400 pounds (due to bank different currency exchange rates). How to record those 11 pounds in my books and what box it goes in self assessment form?
What with 500 euros (411pounds) remaining in the foreign bank?
Shall I just add 411pounds to my income?
Also do I fill foreign income section in Self Assessment? I am UK resident and do not pay any taxes anywhere else.
As far as I'm aware you would need to record the exchange rate difference in the Profit & loss on exchange rate each time you transfer money to your Sterling account. its difficult doing this manually and a lot easier using software to do your books. I think this would go in box 29 on the self employed form SA103 (full) as other business expenses.
Assuming you are recording the balance of your foreign account in Sterling for accounts purposes, then you can treat the transactions as per your query the following way.
Credit foreign account with £411, debit your sterling account with £400 and then Debit the Profit & loss on exchange rate with £11.
I don't think you need to complete the foreign income pages of the tax return as your foreign income is trading income and I assume the foreign account is with a UK based bank?
Don't take this as gospel, but I would definitely have a word with an accountant if you can to clarify it.
Are you doing your books manually or computerised?
Let say I sold for 1000 euros - recorded it in pounds using HM Revenue exchange currency rates, and it was 822 pounds.
What with 500 euros (411pounds) remaining in the foreign bank?
Shall I just add 411pounds to my income?
Regarding the last point, then no you wouldn't add another £411 to income. You've already added the £822 into sales.
If you are drawing up a balance sheet then the euros500 in the bank would be translated into sterling using the rate of the day you draw your balance sheet e.g. 31.3.2010. Then when you finally transfer the euros to your UK bank the difference between the rate at 31.3.2010 and the £ you received would create another profit or loss on foreign translation (as explained above)
-- Edited by ADAS on Monday 30th of August 2010 10:36:21 PM
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
