My business receives money in USD. I have set-up a TransferWise account with two currencies/balances currently active. The goal is to receive money from clients in USD, let it sit in my TransferWise account and then transfer it to GBP when ready. Once in £, I’d then transfer to my Lloyds current account.
If possible, I would like to know if the following set-up in Quickfile will work:
In the image above you can see the money I transferred from my main current account to open the TransferWise accounts in both £ and $. The £15.17 was the amount required to put $20 into the USD account. Quickfile enabled me to tag to the £15.17 as $20 into the TransferWise account (so I guess it then is able to work out the exchange rate that was used at the time of transfer?).
In the image below, you can see I opened two TransferWise accounts in the appropriate currencies and have the correct amounts sitting in them:
Because my income is infrequent, my plan is to just manually enter any income into the USD TransferWise account as and when it comes in.
One thing that isn’t accounted for as far as I can make out, is that TransferWise charge a fee for exchanging currencies and that is obviously lost in the transfer doing it this way - is that something I need to account for and tag somehow? In addition, does anyone know if there are any tax implications when holding money in another currency and how all of this might impact my VAT returns and so forth? Any light on this matter would be greatly appreciated.
While I’m not able to comment on the tax side of things (your accountant may be best place to help here), I’d like to touch on the fee side of things.
TransferWise is quite similar to other merchant accounts in this respect, in that they take a fee before giving you the final amount. What you actually have, is 3 transactions:
- Money out of the original account (in your case, the GBP account)
- Money out for the fee to the service provider
- Money into the destination account (in your case, the USD account)
As an example, if you transfer £100.00 from the GBP account and get charged a £1 fee (so £99 is converted into approx. $132.86), you’d have something like this:
- £99.00 out of the GBP account tagged as a transfer to the USD account
- £1.00 out of the GBP account tagged as a payment to TransferWise
- $132.86 into the USD account as the matching transaction to the £99 out
With any multi-currency items in your account, we store the corresponding GBP value for things like your balance sheet report, so things like your VAT return would use the GBP values.
You may also need to adjust your non-GBP accounts for any currency gains/losses. There’s more detail on this here: Invoicing in foreign currencies
Hope that helps
Thanks again, Matthew.
I am sooo out of my depth!
The information you have provided is much appreciated. Currently, I upload a statement from Lloyds, which in what provided the £15.17 out for me to manually tag. I guess I now need to remove that, find out what TransferWise took (if anything) and then add two new transactions that separates the amount converted and their fee. I’ve not entered too many things manually before so now I’m worried about completely messing everything up but I’ll give it a shot.
I’ll also take a look at the link you provided and then probably have nightmares for weeks
Great - all of this hassle for a 5 pence fee
Just quickly Matthew,
I’m wondering, is there a way to account for the fee as a sort of sub-transaction of the initial £15.17 so that there is parity between my bank statement and current account in terms of the listed transactions? TransferWise took one payment of £15.17 but then obviously took their 5 pence out of that. For my own sanity, I’d ideally like to account for the fee without separating the £15.17 into:
£15.12 - amount exchanged
£0.05 - TransferWise fee
Or, at least doing that in some kind of £15.17 ‘container’ if that makes sense? If it isn’t possible then that’d be good to know also.
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