Euro invoices, exchange rates and VAT

[Deleted User]

Rules are that if you invoice in a foreign currency then you should also put a sterling value on your VAT invoice. Apparently, you can use the market selling rate.

For instance,UK market selling rate

You can use the UK market selling rate at the time of the supply. The rates published in national newspapers are acceptable.


I'm on flat rate scheme so the less my invoice looks in sterling the better for me (i.e less vat to pay back). Is this right? See example :-


Invoice including VAT is 8000E. I use the really poor tourist euro buyback rate of 1.22 (approx) to convert this to £6557. On flat rate vat, my total 13.5% paid on this is £885.


Consequently, if I use HMRCs figure for euros for August (1.1365) then 8000E becomes £7039. This means I pay £950 VAT back.


So I'm better off by £65? Surely its not this simple? Why on earth would I want to use HMRCs rate if I can find a euro sell rate like this is in the paper?

Acc72

[quote=[Deleted User];discussion/3394988]Rules are that if you invoice in a foreign currency then you should also put a sterling value on your VAT invoice.


So I'm better off by £65? Surely its not this simple? Why on earth would I want to use HMRCs rate if I can find a euro sell rate like this is in the paper?[/QUOTE]


The first bit is correct - your invoice needs to show the net amount in euro's and the VAT amount in sterling (you should also show the rate of exchange that was used on the face of the invoice).

If you do a lot of foreign currency invoicing, you should use a consistent source - i.e. HMRC or the FT rate.

With regards to the second point - you are no better off.

If you charge Euro 100 plus vat then the Euro 100 is yours and the vat (whatever that may be) goes to HMRC.

The sterling figure is shown to ensure that both the seller and the buyer record the same vat amount on their respective vat returns so that HMRC don't lose out.

[Deleted User]

Acc72 wrote: »

The first bit is correct - your invoice needs to show the net amount in euro's and the VAT amount in sterling (you should also show the rate of exchange that was used on the face of the invoice).

If you do a lot of foreign currency invoicing, you should use a consistent source - i.e. HMRC or the FT rate.

With regards to the second point - you are no better off.

If you charge Euro 100 plus vat then the Euro 100 is yours and the vat (whatever that may be) goes to HMRC.

The sterling figure is shown to ensure that both the seller and the buyer record the same vat amount on their respective vat returns so that HMRC don't lose out.

Not if you're on flat rate VAT scheme. Then the amount of VAT you end up paying is not directly related to the amount of VAT you charged - its a flat rate of the total gross amount.

Therefore, my point is if the gross invoice amount is less in sterling (because an unfavourable rate is used) then you pay less VAT?

[Deleted User]

Have I got that right?

Is the 'UK market selling rate' the rate at which you could sell the euros back to the bank? i.e. the really poor rate.