Getting Paid in Dollars- Working out tax

[newbusinessguy]

Hi,

I'm self employed and get paid in dollars via paypal. I'm based in the UK and wan to know how I would go about working out how much tax I would have to pay?

Would I pay tax on the exchange rate at the time my tax return is due or would it be based on the conversion at the time of when the payment in dollars was received?

The only problem is it doesn't say what the exchange rate was on my paypal statement as I didn'1t immediatly withdraw money into my bank account in sterling.

What woul you advise? Tax is not due until 2011 but don't want a shock if the exchange rates fluctuate and leave myself short.

Thanks

[Deivas]

Hi,

I wanted to ask the same question. Please, can someone tell?

Would I pay tax on the exchange rate at the time my tax return is due or would it be based on the conversion at the time of when the payment in dollars was received?

Also, where to find official exchange rate I should use? Shall I use the one from Revenue and Customs -> exchange rates for 2010?

Thank you very much.

David

[Ingrid]

Hello,
You have to use the exchange rate at the time the $ payment was received.
The guidelines from HMRC are to use the spot rate on the day the payment is received. You can find the exchange rate for any particular day on the Bank of England website.
Hope this helps!
Ingrid
FRAccountants

[Merlion ABS]

Do you invoice in £'s or $? if invoice in £'s then use the invoice amount. If you invoice in £'s then if the money received is less or more than the invoice amount, you can record this in the profit & loss as "Profit & loss on exchange rate" and it will either be recorded as an expense or income depending on whether you lose out or gain money over the course of the year.


You can however, or used to be able too (not sure now) use the average exchange rate for the year in question. the inland revenue issue these rates each year but you can always find info on sites such as http://www.x-rates.com/