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This is what I mean by a "near-instant" forex transaction. I deposit GBP in my broker account with the goal of buying a US-based company stock, but, when I make the trade, the broker automatically converts my GBP into USD, and then buys the stock for me.

Assuming that I sell this stock at some later time, should I report only two events, or four? That is, only the stock buy/ sell event, or the GBP/USD swaps plus the buy/ sell event?

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It doesn't matter. The relevant tax is Capital Gains Tax, and you'll end up with the same gain (or loss) in GBP no matter how you calculate it. You do need to keep records to show how you calculated the gain/loss, but you won't need to actually include them in your tax return.

The fundamental point is that you are starting with some GBP, use it to buy some USD, then use all the USD to buy stocks, and then later doing the same in reverse to get some GBP. No matter how you add it up, your eventual gain/loss is just the ending GBP minus the starting GDP. Anything more complicated you to do calculate the gain/loss should just cancel out.

If you ended up holding some USD for some time, and it crossed a tax year boundary, then you might need to separate out the calculation and gains to work out how much is attributable to each tax year. But that seems quite unlikely in the scenario you describe.

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  • As far as I know, if for whatever reason the GBP/USD exchange rate went in favour while you were holding USD, you do need to report that as Capital Gains Tax. No?
    – Paul Razvan Berg
    Mar 1, 2020 at 23:33
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    @PaulRazvanBerg If you were actually holding USD for some time, then it's just possible it might make a difference (but see later), but in what you've described, you're not holding USD (just some stocks denominated in USD). UK CGT (of foreign currency / property / stocks etc.) is based around "GBP equivalent" at the times of buying and selling. If you convert straight from GBP to USD as you buy (and convert back reasonably quickly) any currency fluctuations are "built in" to the gain/loss.
    – TripeHound
    Mar 2, 2020 at 10:51
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    @PaulRazvanBerg Even if there is a delay in converting one way of the other, so long as all the money eventually went GBP -> USD -> stock -> USD -> GBP then, as GS says, the overall effect is very likely to be the same (a gain holding USD before buying stock would be offset by a lower gain/loss later in the process).
    – TripeHound
    Mar 2, 2020 at 10:59

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