Currency Exchange Rates for non-GBP income and expenses on SA100 return?

[Julian]

In the past when filing my annual SA100 personal tax return I have always converted all foreign income (interest on overseas savings and rental income from overseas properties) using the official "HMRC yearly average and spot rates" web page info (https://www.gov.uk/government/publicati ... vat-yearly) to look up the average exchange rate for the currencies and tax years as necessary. In filling im my SA100 online just now however I noticed on the "Interest and other income from overseas savings" page the following wording for completing that page...

Convert the income into UK pounds using the exchange rate at the time the income arose

It might be that this is the first time I ever read that bit of the web page properly or maybe they've tweaked the wording from previous years but it's got me worried that my simple use of the overall average for the entire tax year might be in violation of this instruction.

As evidence for the prosecution (prosecuting me) I now see when looking carefully at the link I posted above that the URL ends ".../exchange-rates-for-customs-and-vat-yearly", i.e. no explicit mention of personal income tax, so perhaps it is only acceptable to use those rates for business stuff such as VAT.

As evidence for my defence I note that the phrase "the exchange rate at the time the income arose" is open to interpretation because no definition is given regarding an acceptable level of temporal accuracy. Interpreting the requirement extremely strictly could end up with people filing needing to determine the exact rate to the day for the time each transaction credited to their account after a currency conversion. That would be madness (in my opinion) so I assume that is not the intent hence, if one is allowed to make some approximation to the exact time the transaction occurred, is it acceptable for that approximation to be to the average for the tax year as a whole rather than, for instance, the month (presumably then using the official HMRC monthly rate for the month at the time the income arose)?

I'm really hoping I can get away with annual because that's what I've used for my record keeping spreadsheet where I simply transcribed the totals into the online SA100 submission pages making the submission itself trivial. If I have to go to even monthly conversions I will have to reconvert over a thousand transactions (assuming whatever temporal precision is required for converting income would also be required for converting deductible expenses) which would be a major pain.

If I'm honest I'm asking this question for next year's record keeping and tax return. Whatever the answer is I don't think I'm willing to invest the effort on reworking my 2018/2019 record keeping, I'd rather take the risk that I won't be audited. If I am audited I suspect any discrepancy in tax owed by me would be very low hundreds of pounds, maybe even less than £100, and might even end up in my favour so I won't exactly be committing the crime of the century filing this 2018/2019 return using the average annual rate.

- Julian

[mike]

Convert the income into UK pounds using the exchange rate at the time the income arose

When I was working, the sales figures on the VAT and ESL forms had to be converted from euros to sterling at the rate laid down by HMRC for the month in question.

I cannot see how you can go wrong using these HMRC figures for the month of receipt from now on - whether any working backwards is worthwhile, I do not know enough to be able to help, sorry.

You will find the monthly details here for calendar year 2020 https://www.gov.uk/government/publications/hmrc-exchange-rates-for-2020-monthly, and there are links for previous years there as well.

[PinkDalek]

You will find the monthly details here for calendar year 2020 https://www.gov.uk/government/publications/hmrc-exchange-rates-for-2020-monthly, and there are links for previous years there as well.

Coincidentally, I think those exchange rates were mentioned elsewhere on TLF in the last couple of days***. Note, in particular the dates:

February 2020: monthly exchange rates
Updated 27 January 2020

Also, as Julian has mentioned, You should use these exchanges rates if you have to convert any foreign currency to sterling for customs and VAT purposes as per the See more information about this guidance.


*** Found it viewtopic.php?p=280118#p280118 :

Here is that page for exchange rates for 2020 https://www.gov.uk/government/publications/hmrc-exchange-rates-for-2020-monthly
(Yes, it says "for customs and VAT purposes" but it is these pages that the online self assessment forms link to for you to use.)

You will notice that January's is already up, and has a single exchange rate in it for each currency for the whole month, and it was published on the 23rd of December! So, you may well have sometimes, in declaring what you received, actually declared more than HMRC would have you do so, by their exchange rates!

Bonkers, eh?!

[PinkDalek]

It might be that this is the first time I ever read that bit of the web page properly or maybe they've tweaked the wording from previous years but it's got me worried that my simple use of the overall average for the entire tax year might be in violation of this instruction.

They've only tweaked part of the wording. Not the part which includes using the exchange rate at the time the income arose. If you look at past Foreign Notes found below you'll see what I mean.

https://www.gov.uk/government/publications/self-assessment-foreign-sa106

What they have changed and is a mystery, is to include the link to the customs and VAT exchange rates as per the prior two replies and yours. That is new and as mc2fool wrote Bonkers, eh?! but maybe they are taking a more relaxed attitude nowadays.

I've no time further re your query itself (time now found later) but arose has meaning and should be found in the HMRC Manual somewhere or other, although later below it may appear you won't have to go down that route.

As for what rate to use, if you can read this from 2017 it talks of using average for the year but I've no idea who the respondent is and no source is provided:

https://www.accountingweb.co.uk/any-answers/exchange-rates-and-foreign-interest-received

I'm fairly certain there's been discussions on this aspect previously but I can't locate it at the moment. The discussion may have been with Air04.

I've now found another source which appears to be more helpful, from the Low Incomes Tax Reform Group, albeit re Overseas Pensions but the gist is useful:

https://www.litrg.org.uk/tax-guides/migrants/what-uk-tax-do-i-pay-my-overseas-pension

Extract only:

In order to report the amount of the pension to HMRC, you will need to convert it into GBP. Where you need to convert an overseas pension received into GBP (pound sterling), strictly speaking you should use the spot exchange rates on the date(s) you received the income. However, you can use HMRC’s published exchange rates if the income is received throughout the tax year and there are no fluctuations in the amount paid. For example, for the 2018/19 UK tax year you should use the exchange rates published for the year to 31 March 2019.

[Julian]

Many thanks for the answers, especially PD for pulling up all that stuff.

In light of the fairly significant amount of work to rejig my 2018/19 spreadsheet to monthly rates and taking some comfort from some of the info in the final post I've gone ahead and filed that at annual rates. I don't want to open a can of worms and potentially make mistakes in any re-jigged spreadsheet due to my having to rush things since it's so close to the filing deadline.

For the 2019/20 return I have a year to tweak things so I might at least have a look at how difficult it would be to rejig my tax spreadsheet to switch to using the monthly figures just to be a bit safer. I usually do some sort of re-jigging of the spreadsheet every year anyway as each year I find things that could be done better, layouts that might be a bit clearer, extra reconciliation checks that might be useful, etc.

- Julian