The Lemon Fool

Hi all

Ok, I have HMWO in my non-ISA Interactive Investor trading account and it has just paid out a dividend in dollars.

2 questions:

1. Is there an alternative that pays dividends in sterling?
2. How do I handle this dividend from a tax perspective? I need to manually convert it in in Interactive Investor into sterling. Do I do this and then use that on my tax form as the dividend amount???

The reason for 1 is so I avoid the pain of 2!

TIA for any help.

Cheers

Del

deltrotter wrote:1. Is there an alternative that pays dividends in sterling?
2. How do I handle this dividend from a tax perspective? I need to manually convert it in in Interactive Investor into sterling. Do I do this and then use that on my tax form as the dividend amount???

1. Dunno.
2. No, in theory you have to use an "official" exchange rate, or you can use HMRC's which are, bizarrely, published monthly in advance of the month they are for. See https://community.hmrc.gov.uk/forums/customerforums/sa/0ebf4a32-828f-ea11-99e6-00155d9c871e

Thanks mc2fool

For tax purposes you convert the payment to sterling on the date the payment is received. That converted amount is reported in your tax return.

There is no need to report any subsequent profit or loss you make when you convert your dollars, or reinvest them.

Thanks hiriskpaul - appreciated.

What happens if I do it a couple of weeks later (for example if I am not notified of the dividend payment)?

Cheers

Del

Also, another question, do I report this as foreign income or simply add the resulting amount when converted into sterling as a dividend like all other UK dividends?

TIA

Del

deltrotter wrote:Also, another question, do I report this as foreign income or simply add the resulting amount when converted into sterling as a dividend like all other UK dividends?

TIA

Del

It 's Dublin based, so Foreign. Although if your total foreign income is low ( IIRC > £300 ) you can just put it in with UK income.

Thanks genou - appreciated. This is very helpful.

deltrotter wrote:What happens if I do it a couple of weeks later (for example if I am not notified of the dividend payment)?

You'll do it once a year when you do your self-assessment return.

deltrotter wrote:Also, another question, do I report this as foreign income or simply add the resulting amount when converted into sterling as a dividend like all other UK dividends?

Some time after the end of the tax year (usually a couple of months with most brokers) your broker will provide you with a consolidated tax certificate showing all your dividends received, and they will be broken down by UK or foreign.

deltrotter wrote:Thanks hiriskpaul - appreciated.

What happens if I do it a couple of weeks later (for example if I am not notified of the dividend payment)?

Cheers

Del

Look up an exchange rate for the date of payment.

Tx hriskpaul

My A J Bell Youinvest SIPP and ISA accounts automatically convert dividends to sterling and make a separate FX charge of 0.05%


The HMWO dividend payment on 11/02/2021 worked out at 05.70790P before the FX charge

Thanks Ricksure

That works for SIPPs and ISAs but NOT for other accounts...

Took me by surprise.

I'm move back to funds in my non-SIPP/ISA account to simplify matters, ie. my dividends will be paid in sterling.

Cheers

Del

Ricksure wrote:My A J Bell Youinvest SIPP and ISA accounts automatically convert dividends to sterling and make a separate FX charge of 0.05%.

Youinvest FX charges are:

First £10,000 1.00%
Next £10,000 0.75%
Next £10,000 0.50%
Value over £30,000 0.25%

That is not good, but is better than some. Many (most?) online brokers do not allow FX to be held in dealing accounts, and FX dividends are automatically converted to sterling. Exceptions are II and IG.

Youinvest FX charges are:

First £10,000 1.00%
Next £10,000 0.75%
Next £10,000 0.50%
Value over £30,000 0.25%

That is not good, but is better than some. Many (most?) online brokers do not allow FX to be held in dealing accounts, and FX dividends are automatically converted to sterling. Exceptions are II and IG.

The above is the foreign exchange charges on international dealing, the FX charge on foreign dividend payments is 0.05%

Ricksure wrote:

Youinvest FX charges are:

First £10,000 1.00%
Next £10,000 0.75%
Next £10,000 0.50%
Value over £30,000 0.25%

That is not good, but is better than some. Many (most?) online brokers do not allow FX to be held in dealing accounts, and FX dividends are automatically converted to sterling. Exceptions are II and IG.

The above is the foreign exchange charges on international dealing, the FX charge on foreign dividend payments is 0.05%

0.50%, not 0.05%.
https://www.youinvest.co.uk/isa/charges-and-rates

hiriskpaul wrote:For tax purposes you convert the payment to sterling on the date the payment is received. That converted amount is reported in your tax return.

There is no need to report any subsequent profit or loss you make when you convert your dollars, or reinvest them.

I think the second statement may not be correct here.

Technically the receipt of $140 in gross dividends - and ignoring withholding tax for simplicity - which are not immediately converted on day 1 when the rate is 1.4:1 is treated as:

(a) a notional receipt of £100 reportable for income tax purposes

plus

(b) the deemed purchase of (establishment of a position in) USD of $140 with a base cost of £100.

If the $140 subesquently converted to GBP at, say 1:1, in a year's time,, a separate £40 capital gain must be recognised. More likely, the $140 acquisition will be added to any existing USD position and will form part of a section 104 holding dealt with in the usual way.

https://www.gov.uk/hmrc-internal-manual ... al/cg78316


At least, all this was my understanding the last time I delved into this in depth when I have some meaningful fx compenents of foreign security transactions. I'm happy to be corrected with another HMRC reference (eg maybe the a/b sytle bifurcation of a foreign security or ccy purchase only applies to capital transactions, not dividends received), as it would make life easier...

eventide wrote:.... I'm happy to be corrected with another HMRC reference (eg maybe the a/b sytle bifurcation of a foreign security or ccy purchase only applies to capital transactions, not dividends received), as it would make life easier...

I can't help you there, even if one were to consider moving the currency to a bank account for personal expenditure purposes the CG78315 - Foreign currency: personal expenditure of individuals exemption wouldn't appear to help as CGA92/S269 applies only to foreign currency which was specifically acquired for personal expenditure of this kind. If remuneration, interest, dividends or other sums are received in foreign currency, then that foreign currency has not been acquired for the purposes specified in Section 269: it has not been acquired for any specific purpose at all ... https://www.gov.uk/hmrc-internal-manual ... al/cg78315.

All somewhat ridiculous and I would guess your numbers are far greater than those in your example. Many are unware of such a complexity.

For some reason I thought I read somewhere a few years ago that we did not have to do this nonsense any more. Looks like I was wrong and have not been doing this properly

Thanks for the link.

hiriskpaul wrote:For some reason I thought I read somewhere a few years ago that we did not have to do this nonsense any more. Looks like I was wrong and have not been doing this properly

What you were probably thinking about is From 6 April 2012 the treatment of foreign currency bank accounts was significantly simplified. ... https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg78321. I recall it all being discussed way back on TMF a few times but I'll confess to having forgotten most of the finer detail since then as it doesn't impact me.

There's plenty more in the HMRC internal manual Capital Gains but, having glanced at it again, I found this page which may offer some practical assistance CG78409 - Foreign Currency - practical considerations with returns https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg78409 depending on your situation.

Thanks for the link.

I hope those thanks were directed towards eventide who initially raised the issue!