Paypal currency conversions

[Tishu89]

I'm hoping someone can advise me how to account for some purchases I've made for my small (not VAT registered) sole trader business from overseas, using Paypal. The purchases appear on my exported spreadsheet as three lines, for example -20GBP, +22EUR, -22EUR, where the first two are Paypal converting some GBP into Euros, and the last one is the seller actually getting paid in Euros.

I gather that I am supposed to convert sums in non-GBP into GBP for my tax return, but I'm wondering what exchange rate to use to do this. The easiest thing would seem to be to use Paypal's exchange rate, as there would be no extra conversion expense line to put in then - but that exchange rate is poor presumably because Paypal has worked their charges into it. So should I use some other exchange rate, e.g. HMRC published rate, and then infer a currency conversion expense from the difference between this and the GBP that Paypal uses? Or some other method?

Thanks for replies.

 

[Scalloway]

I would just use the paypal rate. I don't see any advanage of doing sums that will just end up with the same answer.

 

[Tishu89]

Thanks for reply. Recently, I noticed that the order of the three transactions in a currency conversion has changed, so that Paypal is now paying the seller first, which actually makes my account go into negative balance for the foreign currency, then afterwards converting some of my GBP to restore the foreign currency balance to zero. So using the example above, now the time order of transactions is: -22EUR; -20GBP; +22EUR.

Does this change my accounting procedure? I suppose in a sense Paypal is advancing me some euros before paying itself back with my GBP? I'm not really sure how I should handle such advances (is it a loan?)

 

[Scalloway]

If you are a sole trader teh as long as the correct amount goes into your accounts for thr taxman the method of achieving it doesn't matter too much.