After looking on here for answers... please correct me if I'm wrong!...
When IT comes to completing a VAT return where there are Purchase Invoices which have been received in Euros...
Is it best to convert the Invoice from Euros to Stirling by using the HMRC currency conversion rate for the applicable period for VAT purposes?
Also, does anyone else who deals with businesses which issues it's Sales Invoices in the UK to European countries, who also receives Purchase Invoices from European countries in Euros have any helpful tips or advice.
I'm aware of the calendar monthly EC Sales Lists but what else do I need to be aware of?
Any input to this query would be most appreciated.
I convert any euro purchase invoices to sterling using the exchange rate that we bought the euros with, so for example if the invoice is 10000 euros and we bought the euros to pay it at 1.19, then the invoice would go on at £8403.36 with the exchange rate noted.
In this instance I only have the Invoices to work out the return, and no notes apertaining to the rate actually paid, plus some of the invoices are unpaid for return as current. Moving onto Sage after the financial year end, so I may find your method useful...
Does your method also mean a ''currency exchange variance account'' is not required?
In this instance I only have the Invoices to work out the return, and no notes apertaining to the rate actually paid, plus some of the invoices are unpaid for return as current. Moving onto Sage after the financial year end, so I may find your method useful...
Does your method also mean a ''currency exchange variance account'' is not required?
I'll be completely honest and say "I just don't know".
The way I've described has passed a vat inspection and I don't know what a ''currency exchange variance account'' is.
Do you not have any statements etc from when you bought the euros?
I'm sure the details will be on the statements with regards to the cost of the Euros... some have been paid by debit/credit card too... but in this instance until the client moves onto Sage I'm just going to go with the HMRC's spot rate I think as it will save time.
A ''currency exchange variance account'' comes into being when there's a difference between the invoice amount and the total paid (rounding). As you process your p/l invoices at the rate of the euros they were paid with I'm assuming there's never a difference.
Sorry, I also meant to ask if you compile a calender monthly EC Sales list too?
The Euro element and dealing with EU member states is a new one on me!!!
I've written software that handled this for standard VAT companies (ie not for FRS or cash VAT accounting, both of which I have little knowledge of the rules for)
It booked the invoices at a suitable rate chosen by the operator at the time of invoicing. This is what value would be used for all VAT reporting.
Then when the cash was paid a variance would be generated from the system's memory of the original rate. That variance would be a profit or loss straight to the P&L account with no VAT consequences. (a bit like bank charges I suppose)
I'm confident that approach is fine with HMRC because we supplied hundreds of fairly large businesses with the software, and never once did we get any comeback about the VAT calculations.
-- Edited by Tom McClelland on Wednesday 21st of March 2012 11:10:29 AM
