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Business Bank Account (when primary income will be in USD) & Tax Situation

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    Business Bank Account (when primary income will be in USD) & Tax Situation

    Hi,

    I have just landed a contract to license some software I have written, with a company based in the US. I have taken the appropriate step of setting up a limited company and now require to choose a suitable business bank account to collect the licensing fees, which will be exclusively in USD (and there is no negotiation over being paid in any other currency).

    The income from this software is unlikely to be particularly large (i.e sub £100k in total) and will be paid monthly by bank transfer based on sales of the product which includes my work.

    I presume if I just open a GPB business account with a high street bank I will be killed on fees / exchange rate on these regular transfers.

    Which accounts would posters recommend I look at?

    And how does having all the money paid in USD effect my tax situation?

    #2
    Being paid in dollars won't effect your tax - the values are simply converted to sterling, a gain or loss on exchange is recognised in the accounts as appropriate and you pay CT on your profits as normal.

    I can't recommend a bank - but I believe Cater Allen have a dollar account (I may be wrong - I'm sure someone will correct me if I am!)
    ContractorUK Best Forum Adviser 2013

    Comment


      #3
      Yes, Cater Allen do have a dollar account, but it can only be used for internal transfers (and hence converted at their internal rates), not for transfers out to a specialist currency exchange service, for example. You can get better rates with Cater Allen if you transfer over 25k in one go. Their rates for amounts below 25k typically have a ~1% margin on the interbank rate, depending on volatility.

      The cheapest way to do this is to open a USD account with a provider that does allow external transfers (e.g. HSBC) and then also open a multi-currency FX business account with OANDA, HiFX or another dedicated FX company that provides access to exchange rates that are only marginally worse than the interbank rate (by a few pips). You can then use the FX account as an intermediary between your USD and GBP business accounts. However, in the unlikely event that the FX company goes bust mid-transfer, you'll be out of luck, as they aren't covered by FSCS. Personally, I can't be bothered with the hassle of all that, but it will save you several hundred quid per year on 100k income.

      Comment


        #4
        Have you got any ideas how the charges on the HSBC USD Business Account compare to their UK business accounts and other high street banks offerings?

        I am wondering if given there are lots of free business banking offers on sterling accounts, if all the charges associated with a USD business account will outweigh any savings on the foreign currency exchange.
        Last edited by oracle3001; 23 May 2013, 17:43.

        Comment


          #5
          Originally posted by oracle3001 View Post
          Have you got any ideas how the charges on the HSBC USD Business Account compare to their UK business accounts and other high street banks offerings?

          I am wondering if given there are lots of free business banking offers on sterling accounts, if all the charges associated with a USD business account will outweigh any savings on the foreign currency exchange.
          If you're consistently bringing in ~100k GBP a year, the currency savings will probably (significantly) outweigh the service fees on maintaining the bank accounts (there are no charges on the FX accounts, but they typically charge a small fee of, say, 10 quid per transfer). It's more the hassle of maintaining the accounts and meeting whatever minimum balance requirements are in place for the USD account. You also have to consider the frequency with which you'll make manual transfers. To some degree, you're hedging against currency fluctuations by having the invoices paid in directly to your Sterling account each month (i.e. unless you plan to make manual transfers with a similar routine).

          Aside from what you do with the currency exchange, you may consider charging your client a fee to cover the hassle of foreign exchange (i.e. x% of the invoice total).

          Comment


            #6
            "If you're consistently bringing in ~100k GBP a year,"

            I think that is unlikely.

            And I am unable to change the terms of payment and it is based on a % commission on the final products sales, which will be paid at regular installments.

            Comment


              #7
              "If you're consistently bringing in ~100k GBP a year,"

              I think that is unlikely.

              And I am unable to change the terms of payment and it is based on a % commission on the final products sales, which will be paid at regular installments but each one is unlikely to be huge.

              Comment

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