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HMRC’s approach to currency conversion and remittances causes more problems than it solves, says JAMES KESSLER QC
KEY POINTS
- HMRC use date of receipt to convert foreign currency to sterling in many areas.
- However they use date of remittance for foreign income taxed on the remittance basis.
- This has caused further anomalies which are now the subject of proposed legislation.
- Date of receipt is the correct time to use and solves these problems.
It is generally accepted that UK tax is assessed in pounds sterling and all entries on tax returns should be in pounds sterling. Foreign currency must therefore be translated into sterling.
For this purpose it is necessary to decide the date(s) on which the exchange rate is determined (referred to below as ‘the currency conversion date’).
CGT treatment
There are two possible ways to compute the gain where an asset is purchased and sold in a foreign currency. Suppose...
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