Here's everything you ever needed to know about getting a euro account in the UK.
Fools have been asking questions on our Q&A tool recently. Here's my answer to a question to this week's Question Of The Week.
Thanks go to Karatekate who asks:
"I have a couple of customers who have asked if they can pay in euro - cash euro; I also have customers from Europe who would like to pay in euro through my website. Do I need a euro account or can I pay euro into my normal bank account?
I don't expect the amounts to be great, nor the frequency at the moment, it seems a lot of trouble to open another account just for the euro. After all it's all money - isn't it?"
Accepting Euro
Firstly, it's important to note that you are not obliged to accept payment in euro as it is not legal tender in the UK. This doesn't mean that you can't - indeed, many UK businesses find it useful to be able to accept it.
Fool poster MikeGG1 points out that "accepting cash euro is no problem, especially if you holiday in the euro zone. Just accept them at the current exchange rate and save them up for your next holiday".
Pricing
If you plan to be able to take payment in euro as well as sterling it is important to state clearly your pricing in each currency (you can find up-to-date exchange rates at the Financial Times or Bloomberg websites). You will probably want to take into account any additional costs in your euro pricing and this should be made clear. You will also need to decide whether to give change in euro or sterling.
For payments in euro that aren't in cash, you'll need to work out the best way to accept them and this will largely depend on the sum you're dealing with.
kashmie8821 notes that it is "not a bad idea to open a Euro (or even US dollar) account, especially in the current economic climate".
Euro Account
If you often receive euros, it may well be worth opening a euro account. However, before doing so speak to your bank manager to check what the charges would be and whether or not it would be cost effective for you. If you will only occasionally receive small euro payments, it may be easier to simply pay them into your sterling account. However, you should check with your bank as the exchange rate may be poor and charges hefty.
Alternatively, and depending on who you bank with, another solution is to open an account with an affiliated bank in a country that uses euro, as it may allow you to transfer between accounts with no fee and close to interbank exchange rates. Lloyds TSB, Barclays and Halifax all have branches in Spain, for example, which allow transfers from euro to sterling and back again. However, you may find this is only suitable for larger sums.
PayPal
PayPal Standard is another option widely used for small businesses to accept online foreign currency payments. You'll need a PayPal Standard account which will allow your customers to pay via this method. You'll have to pay a receiving fee to accept payments (typically around 20 pence plus 1.4-3.4%) and the money will arrive in your PayPal account immediately. It can then be used directly from there, or converted to sterling and transferred to your bank account.
Conversions are carried out at the PayPal exchange rate and funds take 3-9 working days to reach your account (plus you may have to pay a small fee). However, it's worth noting that not all readers have had good experiences with PayPal.
However you choose to accept any euro payments it is obviously important not be out of pocket so ensure you include any handling costs in your fees. Plus, as exchange rates fluctuate, you may wish to state how long a particular price is valid for and that you reserve the right to adjust published prices, should the exchange rate vary by more than a certain percentage.
Regulations
There are quite a few regulations, too, concerning payments in euro and sterling. For example, should you issue an invoice in euro for a supply made within the UK, you will have to show the amount of any VAT charged, and the total amount, in sterling. And as you'll need to complete your tax return in sterling, all euro payments will have to be converted. You can find out more about the rules and regulations governing businesses accepting euro in this factsheet. But as the flexibility to accept other currencies may be useful to your business it may be well worth all the trouble.
Editor's Note: This article should not be seen as individual advice for Karatekate. We don't know any details of the business mentioned and so can only give general information.
The comments above are the opinions of the author only and do not represent advice specific to your circumstances