Income tax declaration exchange rate to be used.

[JohnRoss]

As usual I asked my local tax office about the exchange rate to be used and got this reply to my email:

Monsieur
le taux de change est :
£ X 1.1972 =  €
Cordialement,
Contrôleur Principal des Finances Publiques

This would appear to be the rate some sites gave on the 30th of December 2011 a date that I gather some tax offices use when asked this question..........JR

PS Just thought I would get the ball rolling this year!

[Gardian]

You're right - somebody did have to start it off !

Quite frankly, if there's anybody on here who got nearly €1.20 for their sterling throughout 2011, then I'd love to know how they did it. If you use that number, you're bonkers.

As always, the answer is to convert your UK earnings at a rate that you can justify if you're asked the question by the Impots. For me, most of my 2011 income was at 1.07 (as a result of a 12 mth contract made in Oct 2010). For a couple of months at the back end of 2011, I had 1.14.

 

[JohnRoss]

Yes I am inclined to agree. Problem is that the advice often given here is to use the rate you got when the transfer of dosh from the UK took place which is fine if you have a pension or some such transferred on a regular basis like once a month. 40% of our income comes from sale of units in a bond and as such is paid directly in euros to our French bank so no problems there. Most of the rest of our income stays in the UK in sterling and comes across in a single lump once a year when we feel the rate is as good as it is going to get though no crystal ball here.

Last year in September we got 1.135 but would one use this figure to convert UK pensions which are paid in sterling throughout the year, I think not! I don't think working out a conversion figure on a monthly basis based on web exchange rate sites is sensible as you still would not know what rate firms like HiFx would have offered had you made a transfer each month. We used to do that but the UK bank exchange rate was not that good compared with larger amounts transferred less frequently. All in all still very confusing each year!....................JR

[Gardian]

JR ..............

To be honest, not confusing at all. 

Pretend numbers. Assume total income tsfrd £30k of which bond income £12k (40%) & lump sum transfer £18k (60%). 

Let's say that the sale of your bonds at £1k / mth came across at an average of €1.11, then that would have given you €13,200.

And then, let's say that your lump sum (£18k) came over at €1.135 = €20,430.

Total € income = €33,630 for £30k = 1.121.  

That's the rate that I'd use for all my UK income (you may well have left some in the UK, but nonetheless has to be declared). It's justifiable and has a rationale.  In the extremely unlikely event of your declaration being queried, you have backup by way of documentation and a reasonable calculation.

Look .......... the Impots aren't after people like you & me - unless your earnings are a lot more than you're suggesting (and if they were, you'd be using a fancy accountant). If you gave them a rationale like that, they'd say "On your way".

[mint]

What I do is this:  (and I have to thank Coops for the suggestion of this way of conversion)

OH has 3 incomes monthly (not vast sums, I assure you) and I have one every month.

On the date that the monies are paid into our accounts, I note the exchange rate on those days.  I don't actually do it on the exact days but I can always find out the historic rates without too much hassle on the internet.

At the end of the year, I add up all the amounts in euros and that is what I declare.  Very simple, even for someone like me who is only semi-numerate. 

[JohnRoss]

Yes thanks Gardian I can see the logic of what you are saying. One can forget the sale of bond units conversion as the investment was in Euros not sterling and is paid in euros. Taking the rest of our income you seem to be saying use the rate we got on the lump sum transfer of 1.135 for the rest of our income regardless of how much we transferred. I take then you would apply this to any interest made on sterling savings accounts as a portion of that would be included in a transfer sooner or later. Have I understood you here?..................JR

[Sunday Driver]

[quote user="JohnRoss"]

As usual I asked my local tax office about the exchange rate to be used and got this reply to my email:

Monsieur
le taux de change est :
£ X 1.1972 =  €
Cordialement,
Contrôleur Principal des Finances Publiques

This would appear to be the rate some sites gave on the 30th of December 2011 a date that I gather some tax offices use when asked this question..........JR

PS Just thought I would get the ball rolling this year!

[/quote]

The Impôts establish their official 2011 average euro exchange rate concession as follows:

(BdF exchange rate @ 31/12/2010) + (BdF exchange rate @ 31/12/2011) / 2. 

For sterling, that works out at 1.179 so perhaps you've transposed a couple of digits from your tax office e-mail...[;-)]

As always, if you find your local office offering a more beneficial rate, then be sure to get it in writing in case of any future tax audit.

 

 

[JohnRoss]

Sadly no, as received! I have little confidence in the local tax office to get it right. Last year for example they sent me this:

Taux de change à retenir pour l'année 2010 :
1 livre = 0,87445 €

I wish!. Needless to say being honest I did not use that....................JR

[Gardian]

[quote user="JohnRoss"]Yes thanks Gardian I can see the logic of what you are saying. One can forget the sale of bond units conversion as the investment was in Euros not sterling and is paid in euros. Taking the rest of our income you seem to be saying use the rate we got on the lump sum transfer of 1.135 for the rest of our income regardless of how much we transferred. I take then you would apply this to any interest made on sterling savings accounts as a portion of that would be included in a transfer sooner or later. Have I understood you here?..................JR[/quote]

Well, the 1.135 is a number that you can 'hang your hat on'.  It represents what you actually got and you can presumably produce documentary evidence if required.

Two other options:

• use SD's 1.179, which is official and obviously perfectly legitimate
• or use your local Impot's 1.197

I know which I'd use.[;-)]  

[cooperlola]

[quote user="Gardian"]

[quote user="JohnRoss"]Yes thanks Gardian I can see the logic of what you are saying. One can forget the sale of bond units conversion as the investment was in Euros not sterling and is paid in euros. Taking the rest of our income you seem to be saying use the rate we got on the lump sum transfer of 1.135 for the rest of our income regardless of how much we transferred. I take then you would apply this to any interest made on sterling savings accounts as a portion of that would be included in a transfer sooner or later. Have I understood you here?..................JR[/quote]

Well, the 1.135 is a number that you can 'hang your hat on'.  It represents what you actually got and you can presumably produce documentary evidence if required.

Two other options:

• use SD's 1.179, which is official and obviously perfectly legitimate

• or use your local Impot's 1.197

I know which I'd use.[;-)]  

[/quote]Oh, OK, let's just pick and choose, why not?  If we receive one amount at 1.135 and the rest we can't be bothered to figure out, let's pick the best average rate from a couple of other sources for the rest. 

The key is consistency, surely?  If you use the rate you got on the day for the lump sum tranfer then, imho, that obliges you to use the very same system for all the rest of your income, ie the correct way - look at the Banque de France rate for the date you received any amounts into sterling accounts and add 'em up.  It is NOT the date it was tranferred by the way - it's the date you received the money, in whatever currency.  If you use an average rate (be it the official one quoted by Sunday, or the one from your Impots office) then imho, you have to use that rate for the lump sum amount too.

D*mm*t.  Every year I vow I won't join in these debates and every year I get sucked in.[:-))]

[Gardian]

[quote user="cooperlola"]

The key is consistency, surely? [/quote]

Exactly Coops.

JR gets a large proportion of his income at 1.135.  Add residual UK income at the same rate (consistent).  The rest comes in €'s.  Add the three together = total € income.

Straightforward and consistent.

[5-element]

My UK state pension gets paid into my Nationwide account. I leave it there until there is enough (it's only part of a pension), then I transfer a lump sum. Last time, as the exchange rate was about 1.20, I thought I was being very clever as I'd waited, but (big sigh) I used Nationwide Swift - thought it was OK to have to pay 25 pounds for that....until I realised that the exchange rate they'd used was just under 1.17...

So, I feel justified not to use more than 1.17 for my tax return... even though it was my own fault to believe that Nationwide would give me a good enough deal.[:'(]

[Chrissie]

We're back to the old confusion about date of receipt and date of transfer.  Any salary or pension you get in sterling should be converted for tax purposes at the rate on that day - as most of us receive regualr monthly payments it is acceptable to use an average for the year.  Whether you are subsequently clever or not about actually buying euros with your pounds is totally irrelevant.

Every year we have lengthy discussions about what rate to use as an average for the year - it is best to ask your local tax office for the rate, as they are the ones who will be scrutinising your tax return at the end of the day.

Chrissie (81)

[Gardener]

If you don't transfer money from the UK pensions in bulk for whatever reason but have to withdraw it from french cashpoints as and when needed as I do. Then the exchange rate is way below anything quoted here.

I did a quick summary of the withdrawals I made each month for 2011 and only two months did I get anywhere near an average of 1.15€ for the year it was around 1.12€.

[cooperlola]

I've never got the Banque de France rate for the day either, even from the direct pension tranfer, but it's still the one I use since, afaik, that's what the regs say.  I can't be bothered to mess around with "averages", "official rates" etc, since it took me precisely 10 minutes on Monday to convert our 26 pension payments for the year using the BdeF exchange rate table for 2011 and a calculator.  How many different income streams does everybody have which apparently makes the legal way so difficult?  Or is it just an attempt to pay a bit less tax if possible?

[NormanH]

Each month I have an entry in Euros in my bank account for the transfer of my pension.

I just add them up for the year. Why the need to use an exchange rate when the actual sums received are clear?

[Gardener]

i want to use as close to the rate that i got throughout 2011, because that is a more accurate reflection of the euros I received and spent.

If you have school aged children and you have to submit figures for bourses etc, then being slightly blasé about the correct rate of exchange relevant to your own finances could cost you dear later.

[JohnRoss]

Anyone got a link to look at the Banque de France rates for 2011, average and monthly?.......................JR

[CeeJay]

I emailed our local tax office at Montpellier this morning and asked the question as to what would be the official exchange rate for paying tax. I have just received a reply which gives a statutory notice of some sort and lists the rate to use for a number of countries.

Against Royaume-Uni it  quotes that the rate as at 1st January 2011 was £0.8608 to the Euro and as at 31st December 2011 it was £0.8353 to the Euro so the taux moyenne over the year would equate to 0.84805 for 1 Euro and then converts that to £1.17918.

Having now asked I shall have to stick with that!!!!

[richyrich2]

http://www.banque-france.fr/economie-et-statistiques/changes-et-taux/les-taux-de-change-salle-des-marches/parites-fin-de-mois.html

Click livre sterling

From end of Dec2010 - End Dec2011.

12/2010;0,8608

01/2011;0,8609

02/2011;0,8528

03/2011;0,8837

04/2011;0,8917

05/2011;0,8720

06/2011;0,9025

07/2011;0,8749

08/2011;0,8856

09/2011;0,8667

10/2011;0,8731

11/2011;0,8558

12/2011;0,8353

Dividing by 13, I make it 0.8704461 or 1.1488

[JohnRoss]

Thanks for the link..........JR

[John Brown]

If this helps here's the actual rates that my Local Government Pension was paid out on the first of each month last year

Often the rates quoted are bank rates not actually used rates

This rate was achieved by 8 Metro Councils and 2 City Councils combining their Euro purchasing power so it would be IMO difficult to improve on

Month    Rate

January    1.16

February    1.16

March    1.17

April    1.12

May    1.10

June    1.12

July    1.09

August    1.12

September    1.12

October    1.15

November    1.15

December    1.15

Average Rate    1.13

[Gardian]

So you've had all that data lurking in the background all this time!

Meanwhile, over umpteen pages of posts, Coops has had a funny turn saying that she wouldn't get involved in this nonsense every year, yet she got dragged in.

Tell you what - if you've a dartboard and a dart or two, then chuck them at the board and take the average of the 'single' numbers that you get. That'll work.

p.s. Tip - don't aim for '20'. 

[John Brown]

I agree with NormanH that rates are a bit academic really when you can tot up your income coming over and use the actual amount that lands in your French account in the year

The other pearl of wisdom, I think from Chancer last year was " use any rate you want as long as you can justify it if asked"

[CeeJay]

I agree with NormanH that rates are a bit academic really when you can

tot up your income coming over and use the actual amount that lands in

your French account in the year

Maybe, but what happens when your main income gets paid into a UK bank and stays there until infrequently called upon, if at all during the year?