Spacemonkey,
No idea about the tax form as we’ve never been asked to do this (possibly as a Ltd co?).
With regard the foreign exchange risk, you are presumably not in the business of “gambling” (or investing as some people call it) on the FX markets? Lets say you’ve agreed a price of $16,425 USD for the work, based on todays spot rate for £10,000 GBP worth of work. If you open a dollar account and they pay $16,425 USD into it (if you don’t open a dollar account the bank converts it at their rate on the day it is received). Even if the exchange rates stay constant you will lose some money converting to GBP (probably at least 3%, but possibly more – the difference between the spot rate tonight and the RBS consumer rate is over 8%!). However it is quite possible that the exchange rate fluctuates too, e.g. if you had issued an invoice about a month ago you would have lost 5% on the value by the time they paid it to you. Of course it is possible that the rates swing in the opposite direction and you make an extra few percent on the transaction – but those things only work in your favour if you can afford to decide when to move the money and keep a close eye on exchange rates. Can you afford to leave the money in a USD account until the rates are back in your favour (could be 12 months?). Shifts of 5% per month are not uncommon. I add 10% to USD invoices for the inconvenience of having to take this risk and the conversion hit.
Worse though, your customer probably wants to know your rate in USD upfront. If you are lucky this is just for a 1 month period. So you agree a rate today, do the work over the next month and the rate creeps and you invoice (at the rate you agreed last month) and then it creeps a bit more before they pay you, then they bank take their slice. If your customer is tougher they want you to set your rate for the whole year now. You could be getting 15% less for work you do early next year than you do now (or you might get more – but do you want to take that risk). I have always had a right to reset prices if exchange rates change by more than 20% from the original contract (which works both ways) or only allow fixed prices for 3 months.
If you want to avoid some of the exchange rate risk – and some of the bank fees then you might want to speak to the commercial part of someone like TravelEx. They will let you agree and fix exchange rates for a specific amount of money in advance (so you can “book” a rate today for money you will receive in 2 months time) as well as charging better rates than the banks.