PayPal dollars and QuickFile

Accounting
1

Hi, new user today and learning the best way to deal with this.

I get paid mostly in USD to PayPal, which I then convert (whenever I can) over to GBP (PayPal has no auto-convert option…annoyingly).

You offer the automatic option to import and convert using xe.com rates - but that’s not an accepted exchange rate with HMRC is it? Don’t you by law have to use the monthly or spot figures HMRC give? Additionally, that would then give a different figure to PayPal.

As I understand, you cannot just use the GBP figure PayPal give you at the end.

A bit confused on how to deal with this together with QuickFile, would appreciate some tips.

Thankfully we have 2 years before MTD comes in for the self employed who aren’t over the VAT threshold…time enough to hopefully play with QuickFile and get the flow going.

2

What currency do you invoice your customers in? Are you invoicing in dollars or do you invoice in pounds and just get paid dollars?

3

It’s not a customer, I am not invoicing. This is a company, a big website (Patreon) paying me and when they do so it’s in dollars to my PayPal.

Also what difference would that make?

4

In QuickFile you still represent your income as “invoices” even if you don’t actually send them to anyone.

There are two separate exchange rates involved here - when you have sales income in dollars what you declare as your income “earned” in pounds is the conversion from those dollars at either the HMRC rate or the market rate on the date you earned it (which in your case is the same as the date you were paid, but that isn’t true in general). You’re allowed to use either HMRC rates or the open market rate (which is what XE gives) as long as you’re consistent, what you can’t do is use the rate your bank or PayPal actually converts at if that doesn’t match the market rate.

If after conversion you receive fewer pounds from PayPal than you got by converting the dollar amount at the market rate, then that difference should be treated as an expense (under currency charges) rather than a reduction in your income - this is the same net result overall but it can matter if, for example, you’re close to the VAT threshold and the difference could push you over.

So the process is roughly:

  • you get a statement from Patreon telling you how many dollars they’ve paid you
  • you create a sales invoice in USD for that amount, and QuickFile will use the market rate from xe.com to convert that to a GBP amount that goes into your P&L under general sales
  • you receive payment into your USD PayPal account, which you tag as “payment from a customer” to settle the invoice
  • you later convert some USD to GBP at PayPal - this would be tagged as a bank transfer from your USD PayPal account to your GBP one, and when tagging the transfer you can specify the exact amounts in both currencies.
  • at a convenient point such as the end of year you create a special journal using the “record currency loss/gain movement” option on the USD PayPal account, which will re-value your USD PayPal balance at the current exchange rate and move the GBP difference to “currency charges” in your P&L report.
5

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