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Use HMRC average annual forex rate?

Client gets daily USD income into paypal. Can I use HMRC average annual exchange rate instead?

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Client is a sole trader UK based online gamer and gets income daily in USD into a USD paypal account.   She withdraws amounts as she needs but not on a regular basis and also uses the account for personal purchases.  The money is therefore not acually exchanged on a straightforward USD to GBP basis.  No tax is taken at source from the income and client has relevant forms stating this.

Due to the fluctuations in the exchange rate in the last year, it works out better for the client if I use HMRC average rates rather than the monthly ones.

It feels wrong to use the annual exchange rate but can someone point me to where it says one cannot use the annual average rate.  In this case the difference to the tax/NI bill would be circa £500 so not massive but definitely worth it to this particular client.

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By gilderda
10th Aug 2017 17:27

HMRC say tax treatment follows generally accepted accounting practice, which IIRC states that you should use the daily spot rate for each transaction or an average over a period such as a week or month where the exchange rate does not fluctuate significantly.

So I don't think in terms of either HMRC or GAAP you could necessarily get away with using an annual average.

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Replying to gilderda:
Giraffe
By Luke
14th Aug 2017 10:53

Thanks. This aligns with my thoughts.

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