I am the sole director of a small limited company that does design work. Many of my clients are in the US or Canada and they all choose to pay me in USD. I bank with Lloyds and have noticed their horrific exchange rate margins eating into my profits so have decided to set up a business account with TransferWise.
To open a USD balance in TransferWise, I had to transfer the equivalent of $20 from my Lloyds account and I will have to transfer similar amounts to open balances in other currencies if I so wish. Are such transactions simply classed as moving money between my own bank accounts within Quickfile? Keep in mind that TransferWise take a small amount/fee during the conversion. I’m basically wondering how to eventually tag these in my current account!
In addition, I have set up a new ‘Merchant Account’ in Quickfile and labelled it as TransferWise to try and keep a record of everything. The idea from my perspective is that I get paid into my TransferWise account in USD, perhaps sit on it a while until there’s a good exchange rate, and then convert to GBP before eventually transferring it directly to my Lloyds business account.
I’ve done a fair bit of reading but I’m still a little unsure of whether or not I’m doing the right thing. I’m not absolutely certain if there are any tax implications I haven’t thought of, or whether Quickfile will be able to manage all of the details necessary for me to continue bookkeeping accurately between the different accounts with all of the exchanges/fees etc!
Any advice or answers would be sincerely appreciated - especially if any of you out there are operating in a similar way.
It’s possible for quickfile to handle all the exchange rates and fees however it will require some monitoring in your behalf. I’m not really an expert in this field as I don’t deal with anyone who uses quickfile and has multiple currencies, others may need to comment on that.
But with regards to fees yes this should be an allowable expense.
You’d need to have one “bank account” in QuickFile to represent each currency balance you hold in TransferWise. When you move money between currencies you’d end up with two transactions on the source account, one for the “amount converted” which you’d tag as a transfer to the other currency bank account (you can enter the exact currency value received at this point) and the other for the TransferWise fee which you would tag as bank charges (either as “something not on the list” or by creating a VAT exempt purchase which would allow you to attach supporting documentation to the purchase record).
One thing to be aware of is that QuickFile doesn’t play nicely with transfers or payments of any kind from one foreign currency direct to another (e.g. paying for a USD purchase using a EUR bank account) - it supports payments in the same currency (e.g. USD to USD) but anything with a currency conversion has to have GBP on one end or the other.
I don’t personally hold balances in TransferWise but I do use it to pay some of my suppliers and this is more or less how I handle it - I have a GBP bank account representing TransferWise, and when I make a payment I have
- the money out from my current account (for the whole GBP amount including fees) tagged as a transfer to the TransferWise account
- the payment to the supplier goes out from the TW account with the GBP amount set to the “amount converted” (net of fees)
- the fee as a separate money out from the TW account to bring the balance back to zero
I’d just like to quickly thank you both for taking the time to answer. I appreciate the advice and will look into some of the things mentioned!
If anyone else is receiving money via TransferWise, I’d still be interested to know how you’re managing it. From my perspective, the more info the better!
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