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Posted Wed, 27 Sep 2023 00:22:12 GMT by C K Chow
Hello, I am still unsure how to report income and expenses for self-employment in the below scenario. I invoiced £100 to a foreign client and she sent the equivalent of £100 from a foreign bank account to my UK bank account. As it is an international transaction, there will be financial charges incurred from the sender's bank and my bank. I agreed that I was responsible for the sender's financial charge £10. The sender's financial charge £10 was deducted from the £100 so I only received £90 in my UK bank account. My UK bank also charged me £5 separately when I received this deposit. I use cash basis so I just need to declare the amount I actually received as income. Is it correct that I just need to declare £90 as income and £5 as an expense? Or should it be £100 as income and £15 as an expense? Thank you for your clarification.
Posted Wed, 04 Oct 2023 12:41:58 GMT by HMRC Admin 25
Hi C K Chow,
It will be £100 income and £15 expenses.
Please note there is a limit to bank charges when using the caxh basis:
Expenses if you're self-employed
Thank you. 
Posted Wed, 04 Oct 2023 19:20:01 GMT by C K Chow
Hello. Thanks for your reply but I need further clarification when using cash basis. On the HMRC webpage, it states that "With cash basis, only record income you actually received in a tax year. Do not count any money you’re owed but have not yet received." Based on the scenario in my original post, my client paid/sent me £100 but I actually received £90 because £10 was deducted as the sender's financial charge before I received the money. With cash basis, why my income is £100 (the actual amount my client paid/sent) but not £90 (the actual amount I received as shown on the bank statement)? Thank you for clarifying this concept.
Posted Tue, 10 Oct 2023 10:16:18 GMT by HMRC Admin 32

You would declare £100 as income and claim an expense of £15. Please note that if you’re using cash basis accounting, you can only claim up to £500 in interest and bank charges. 

Expenses if you're self-employed

Thank you.

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