My client is Polish and in the tax year 2007/08 was in Poland and working paid in zlotys (polish currencly). The notes with the tax credit form say call the helpline in this instance but when I did they just said to convert it into pounds. I explained that the exchange rate had fluctuated over 2007/08 (started with a zloty worth about 17p and finshed off about 22p) and was different still now. The person I spoke to didn't seems sure but suggested just using the current exchange rate.

Has anyone ever done this before and got any idea of which rate I should use to convert it? Seems a bit odd just to use the rate at the date of claim since that would give a different figure for the earnings depending on when in the tax year the claim is submitted.

Fri 09-Jan-09 09:08 AM by shawn

(Edited to fix link)

Might TC (DCI) Regs - reg 3(6A) be relevant?

"(6A) Income paid to a claimant in a currency other than sterling shall be converted into sterling at the average of the exchange rates applicable for the conversion of that currency into sterling in the period of 12 months ending on 31st March in the tax year in which the income arises."

See SI.No.2006/2002

Thanks John that sorts it.

Er, perhaps not.

Does this mean 'mean' or could it mean median, mode or other of the various 'averages'

You might even think that a diurnalised return using -1 + {\prod (1+Rt)}^{1/\sum t_i} would be fairer to your client.

Mean, surely. That is the only way to iron out the fluctuations, but it would clearly have to be diurnalised, wouldn't it, or it is not a true mean.

You're implying common sense should be used to interpret a poorly drafted regulation.

e.g. "the average of the exchange rates "

If, in 2008, there were 2 exchange rates

2 to 1ukp
20 to 1ukp

then the 'average' would be 11 to 1 ukp.

if however, it was 2 to 1 ukp from January 1st to December 30th then a diurnal figure would be somewhat different.

That's without asking at what time on each day, what happens at weekends and bank holidays or, rather more seriously, what happens if those earnings only lasted for a month during a time of low exchange rates when the annual rates were high.

What they should have done was to have drafted it by reference to a recognised figure, such as the FT figure published annually; thereby taking all the fun out of it.

Should anyone have to do this there is a useful website for doing the conversions below. It also works out a mean over whatever period you put in (eg. a year) based on the daily mean. For anyone who wants to work out the mode and median etc you will have to work this out for yourself or give it your kids and tell them its practice for their GCSEs.

http://www.oanda.com/

I can see Gareths point about earnings at times of low rates vs earnings at times of high rates calculated on the basis of the same rate. It would have made a significant difference if you your Zlotys were calculated at the rates in April 2007 and that in March 2008. As for Zimbabwe dollars.......

Hi

HMRC have provided the following information to me in response to this question. They do have exchange rate information on their site to be used for these sorts of conversions. It is based on average daily rates from the Financial Times.

The link to all currencies is here:
http://www.hmrc.gov.uk/exrate/index.htm

For Poland:
http://www.hmrc.gov.uk/exrate/poland.htm

The helpline staff are to be reminded to direct claimants/advisers to this guidance in future.

Hope that helps.

Victoria
(LITRG)