UK Exchange rate usage for end of Year Business accounts

Jul 1, 2020
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United Kingdom
Hi! I've been working as a consultant in Norway for the last 18 months, through my UK limited company. During that time the exchange rate between NOK (Norwegian Kroner) and GBP has been rather volatile due to Brexit, Covid, price of oil etc. The value of 1 GBP has ranged between 10.6 and 13.7 NOK during this time.

I've held the NOK I've earned in a Revolut FX account, exchanging to GBP when I need them. However I still hold a lot of my income in NOK.

I am currently preparing accounts for my accountant for the Year ending 2019. For simplicity, I'll say that in 2019, my companies profit were 1,000,000 NOK. As the exchange rate on 31.12.19 was 11.65, this would give me a GBP profit of £85,836.

However, I didn't actually exchange the money then and while I've exchanged some money at a better rate earlier in the year, I also exchanged some money in 2020 at rates of around 13.2, which would value my profit at £75,757, a difference of £10 compared to above, and potential Corporation tax difference of circa £2k.

I will need to exchange more money into GBP in order to fulfill my UK tax liabilities for last year, and obviously this will again be at another rate dependent on when I make the exchange.

My question is therefore, what exchange rate should I (or can I) use for calculating my UK tax liablity. Is there flexiblity on the date X-rate you use to calculate the exchange rate? Any guidance on this would be appreciated.

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