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Recording bank transfers between different currency accounts
Thread poster: Jenni Syrjala

Jenni Syrjala  Identity Verified
United Kingdom
Local time: 17:34
Finnish to Swedish
+ ...
Sep 30, 2014

I am based in the UK, but most of my clients are in Finland, and as my UK bank was charging me £7 every time a payment was made into my UK business account, I started having my Finnish clients pay into my Finnish bank account.

However, from now on I'll be having more business expenses taken from my UK business account than before, so I need to start transferring money from my Finnish account to my UK one. I'm not sure how to enter this into my bookkeeping, though - any suggestions?

I assumed that normally, you would just deduct the amount in payments and add it in receipts, and mark both as "Bank transfer" (although I may be wrong?), but how does it work when there are different currencies involved? I usually use Transferwise to send money between Finland and the UK as it's so much cheaper than bank transfers, but the charges don't come up anywhere on my account (they didn't for normal bank transfers when I used to do those either), so how can I explain the difference between the amount in euros that I've sent and the amount in pounds that I have received?

Or does someone have a completely different and better way of doing this? I am quite new to all this, and the trainer at the course I did on bookkeeping didn't know anything about dealing with several currencies/accounts to begin with...


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Tom in London
United Kingdom
Local time: 17:34
Member (2008)
Italian to English
Sounds like Natwest Sep 30, 2014

Jenni Syrjala wrote:

I am based in the UK, but most of my clients are in Finland, and as my UK bank was charging me £7 every time a payment was made into my UK business account, I started having my Finnish clients pay into my Finnish bank account.

However, from now on I'll be having more business expenses taken from my UK business account than before, so I need to start transferring money from my Finnish account to my UK one. I'm not sure how to enter this into my bookkeeping, though - any suggestions?

I assumed that normally, you would just deduct the amount in payments and add it in receipts, and mark both as "Bank transfer" (although I may be wrong?), but how does it work when there are different currencies involved? I usually use Transferwise to send money between Finland and the UK as it's so much cheaper than bank transfers, but the charges don't come up anywhere on my account (they didn't for normal bank transfers when I used to do those either), so how can I explain the difference between the amount in euros that I've sent and the amount in pounds that I have received?

Or does someone have a completely different and better way of doing this? I am quite new to all this, and the trainer at the course I did on bookkeeping didn't know anything about dealing with several currencies/accounts to begin with...


That sounds like Natwest. THey used to do the same thing to me. Eventually I moved to FirstDirect.

For the UK tax authorities, you are based in the UK, and you must declare all of your income earned in the UK, no matter where it is paid to you.

In your case you'd have to find a way of declaring the amount you receive in Finland although this would have to be declared in GBP so that the UK tax authorities can understand how much you've earned.

This sounds complicated. Wouldn't it be better just to open an account with a different UK bank that doesn't charge so much, such as FirstDirect?

In any case, the only thing the UK tax authorities are interested in is how much you actually received, in GBP, at the end of all these transactions.

[Edited at 2014-09-30 13:53 GMT]


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Tapio Närhi  Identity Verified
Finland
Local time: 19:34
Member (2014)
English to Finnish
+ ...
Bank transfers Sep 30, 2014

Hei!

Seems odd that bank charges are not shown on your bank statements at all. At least the Finnish banks have price lists for the charges they take from the poor customers in various transactions...

As far as different currencies are concerned, I suggest you visit the website vero.fi for more information. I vaguely remember that there was some advice on rates between currencies, actually 'fixed' rates per month if I remember correctly, specified by the Bank of Finland. But don't take my word for it, go and check it for yourself. Hope this helps.

Tapio


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Thomas T. Frost  Identity Verified
Member (2014)
French to Danish
+ ...
This is how I deal with it Sep 30, 2014

I'm not an accountant but this is what I do:

Revenue: regardless in which currency I'm paid and in which country the account is, I look up the ECB's reference rate for the day the revenue was effectively credited, then apply that rate to get the equivalent in my local currency (euro in my case). The result is the income to declare.

http://www.ecb.europa.eu/stats/exchange/eurofxref/html/index.en.html

Note, it is not a question of only declaring the net funds you bring back to the UK. All revenue is taxable in the UK as soon as it has been credited anywhere in the world.

You can download all the historical exchange rates back to the beginning of the euro.

Exchange of currency: when I transfer between accounts in different currencies, I first note the outgoing amount in my local currency (euro). If it is from a non-euro account, I apply the ECB rate on the day it was debited. The amount then credited in another currency will always be slightly less (expressed in local currency) than the amount that was debited. The difference is a deductible expense. In addition, they may or may not be flat fees to deduct as well.

UK banks have been a racket for foreign transfers as long as I can remember, but there are plenty of alternatives. You don't just lose money on their flat fees but also on their hidden commissions that only become clear when you compare with the ECB rates. When I make international transfers from my Danish banks, the flat fee is €2 and the commission is 0.15%. Typical UK commission is 3%, or more than 22 times as much. Highway robbery.


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Jenni Syrjala  Identity Verified
United Kingdom
Local time: 17:34
Finnish to Swedish
+ ...
TOPIC STARTER
Problems with invisible fees Sep 30, 2014

Tom: It was RBS, actually. I'm currently converting everything into pounds anyway for my bookkeeping, and declaring everything in the UK, I'm just trying to find a way to transfer money between my two business accounts without the numbers not working out right in my bookkeeping and bank statements. Changing to a different bank might be the only answer... Do you just have a regular current account with FirstDirect then, as they don't seem to offer business accounts? And do they not charge anything for receiving foreign payments?

Tapio: I would get a letter each time, telling me what they'd charged me, but strangely there wasn't anything on my statements. And I use the daily spot exchange rates from the Bank of England to convert the money paid in EUR to GBP, so that's all fine, but if I send e.g. 1000€ from my Finnish bank account, and the daily spot rate for that is e.g. £781, but I only receive £773.73 because of transfer fees that don't appear anywhere, then I'll have a hard time reconciling my accounts...

I'm hoping someone is dealing with the same issue, as I remember reading that some people in the UK tend to have euro accounts in other countries to save in bank charges... If nothing comes up, I supposed I could also just start paying my pensions contributions from my personal account rather than my business account, as they're mainly what's causing me to have to transfer money in the first place...


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Tom in London
United Kingdom
Local time: 17:34
Member (2008)
Italian to English
Robbery Sep 30, 2014

Thomas Frost wrote:

.....Highway robbery.


That's why the UK was so stupid not to join the Euro when it had the chance. It was prevented from doing so by currency speculators. Currency speculators like differences between currencies because they can make millions by placing bets on how these differences will fluctuate from one day to the next or even from one minute to the next.

Inside the banks of which we speak, as we speak, there are traders sitting at computers buying and selling euros against GBP against dollars and all other currencies, shifting millions by the minute.

Had the UK joined the Euro, all transactions between the UK and the rest of Euroland would not be subject to these fluctuations.

There's no way out of this: no matter what currency you're exchanging to a different currency, somebody is always going to be looking for a way of making money off the transaction.


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Jenni Syrjala  Identity Verified
United Kingdom
Local time: 17:34
Finnish to Swedish
+ ...
TOPIC STARTER
Difference in amounts Sep 30, 2014

Thomas Frost wrote:

Exchange of currency: when I transfer between accounts in different currencies, I first note the outgoing amount in my local currency (euro). If it is from a non-euro account, I apply the ECB rate on the day it was debited. The amount then credited in another currency will always be slightly less (expressed in local currency) than the amount that was debited. The difference is a deductible expense. In addition, they may or may not be flat fees to deduct as well.


This is exactly what I'm trying to figure out - how can I show this difference, other than in the amounts not matching? You say it's a deductible expense, which is what I've been told as well, but I'm not sure how to deal with it in practice when doing my bookkeeping.


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Tom in London
United Kingdom
Local time: 17:34
Member (2008)
Italian to English
RBS Sep 30, 2014

Jenni Syrjala wrote:

Tom: It was RBS, actually.


Same thing as Natwest !


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Jenni Syrjala  Identity Verified
United Kingdom
Local time: 17:34
Finnish to Swedish
+ ...
TOPIC STARTER
All the same Sep 30, 2014

Tom in London wrote:

Jenni Syrjala wrote:

Tom: It was RBS, actually.


Same thing as Natwest !


Yeah, you're right, I guess they all seem to be the same thing these days anyway, can't keep track anymore


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Tom in London
United Kingdom
Local time: 17:34
Member (2008)
Italian to English
Just record the final amount Sep 30, 2014

Jenni Syrjala wrote:

This is exactly what I'm trying to figure out - how can I show this difference, other than in the amounts not matching? You say it's a deductible expense, which is what I've been told as well, but I'm not sure how to deal with it in practice when doing my bookkeeping.


The UK tax authorities only want to know how much you finally received in GBP.

To satisfy their requirements I fear you would need to present all of your Finnish bank statements translated into English item by item, together with the exchange rate applicable on the day on which you received each payment, so that you can record those amounts in GBP and pay tax on them.

As I was saying, it sounds complicated!


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Tom in London
United Kingdom
Local time: 17:34
Member (2008)
Italian to English
RBS Sep 30, 2014

Jenni Syrjala wrote:

Yeah, you're right, I guess they all seem to be the same thing these days anyway, can't keep track anymore


I meant that RBS actually owns Natwest, so I'm not surprised they apply the same charges.


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Jenni Syrjala  Identity Verified
United Kingdom
Local time: 17:34
Finnish to Swedish
+ ...
TOPIC STARTER
Foreign accounts Sep 30, 2014

Tom: That's another thing I was thinking about - I might have to go back and get all my Finnish statements in English, as they're currently in Swedish (haha yup, don't ask), but that shouldn't be too much of a problem, I think I can just sign into online banking in English and print them out again. Maybe I'll just need to find an accountant to ask about this to make sure I'm doing it right, and don't get any nasty surprises later...

And I know what you mean, I've previously been confused by the relationship of Lloyds and TSB, for example, so don't know who owns who anymore.


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Thomas T. Frost  Identity Verified
Member (2014)
French to Danish
+ ...
The difference Sep 30, 2014

Jenni Syrjala wrote:


This is exactly what I'm trying to figure out - how can I show this difference, other than in the amounts not matching? You say it's a deductible expense, which is what I've been told as well, but I'm not sure how to deal with it in practice when doing my bookkeeping.


Technically, I treat the outgoing amount as if it had been lent out to someone, i.e. not as an expense. I have a column for such outstanding 'lent-out' amounts. When the money comes back in on another account, I deduct the full amount from the 'lent-out' column, then credits that actual amount in the right bank account column. My spreadsheet shows me the difference in a control column, and that difference is what was 'lost' in exchange commission and which is deductible. However, I do it all an an Excel spreadsheet. If you have an accounting program, you'll need to find a way to account properly for it.

You won't get a piece of paper stating explicitly that £x.xx was lost in commission, it is something you have to calculate as the difference between outgoing and incoming funds.


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Tom in London
United Kingdom
Local time: 17:34
Member (2008)
Italian to English
Accountant Sep 30, 2014

Jenni Syrjala wrote:

Maybe I'll just need to find an accountant


Sounds like it! I'm sure there are a lot of good accountants up there in Scotland where you are.

For obvious reasons, it's important that your bookkeeping and accounting are done correctly.


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Tom in London
United Kingdom
Local time: 17:34
Member (2008)
Italian to English
Who owns your bank? Sep 30, 2014

Jenni- you may find this link useful:

http://tinyurl.com/mbu8gkf


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Recording bank transfers between different currency accounts

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