VAT - billing in EUR to a UK registered company question

[Boo]

Hi,

I am contracting through a UK registered agency where the contract is in EUR not GBP. I therefore invoice for an amount in EUR each time and am paid in EUR, which my bank converts to GBP at the exchange rate that pertains on the date the payment is made.

I originally naively invoiced the agency for VAT at 20% as a sum in EUR but was corrected by their accounts team and told that the invoice must contain the VAT amount in GBP as a requirement of HMRC. They sent me a letter from HMRC confirming this.

So I sent out corrected invoices using exchange rates garnered from xe.com and applied the above to invoices raised since then whilst also taking up the issue with my accountant to ensure I am doing the right thing.

My accountant has pointed me at this HMRC webpage which has several .csv files containing exchange rates they deem to be acceptable. I have a few issues with these files as follows :

In eg the March 2015 .csv file, in column "C" there are several values for EUR ranging from 1.3481 to 1.4232. Lines 72 and 73 give those two figures respectively, but other countries, eg Germany only give the first of the figures.

1. Anyone know where guidance for these issues can be found ?
   
2. Are my fundamental assumptions above in fact correct ? Ie I have to use a figure in the HMRC range as the conversion rate ?
   
3. Can I pick any value between the two figures so long as it pertains to a valid exchange rate, or must I pick one or the other ?
   
4. Must the value for VAT that I use in the quarterly VAT return match the GBP figure I invoice the agency for or can I use 20% of the GBP converted EUR I actually receive (generally slightly different) ?
   
5. Must I keep documentation for my exchange rates or are the HMRC rates definitive, whatever I get in fact ?
   
6. Any gotchas in all this ?

I'd be grateful if people didn't guess or assume the answer if they don't actually know.

Thanks,

Boo

[jamesbrown]

On the specific question about where guidance can be found, see here:

https://www.gov.uk/foreign-currency-...tour-operators

As you'll see, there are two standard methods, one of which is a period rate (versus a spot rate on the date of supply). You should also check that you're invoicing correctly, noting that you must show both the net and VAT amounts in Sterling on the date of supply.

[psychocandy]

Hmmm. I did this a few years ago (invoice and get paid in euros) and unless its changed recently this sounds all wrong to me.

I just invoiced in euros and added vat at 20% in euros. So only difference was the euros rather than sterling. The invoice did have the sterling rates as well but I still got paid in euros. In terms of how these were worked out you can use the HMRC rate or your own - I found it easier to use the rate for the day from some website. BUT this was just for my VAT return purposes not the agents - they just paid the euro gross anyway.

This converting to sterling crap sounds like BS from the agency.

In terms of getting paid, some advice for you.

1) Get a euro business account as well and get the money paid into there. (I've got a cater allen sterling and a cater allen euro account).

Otherwise, I think you'll find its costing a service charge to recieve euros into a sterling account AND you're getting a crap exchange rate.

If you get it paid into a euro account it may be free and your not forced into converting there and then.

2) If you do this you can then move money from euro to sterling when you like but the rate still wont be great. I used currencyfair which is sort of like a peer-to-peer exchange (you offer a swap, accept swaps etc).

Basically, you transfer money from your bank euro account to your currency fair euro account, leave it there, swap it when the rate is right etc, then transfer it back as sterling into your sterling bank account.

There was a fee to BACS transfer euros out of bank but it was still way cheaper like this.

I was a bit concerned at first but used them for years with no issues at all.

I'd sort the VAT thing out first mind because it smells like BS to me.

[Boo]

Hmmm. I did this a few years ago (invoice and get paid in euros) and unless its changed recently this sounds all wrong to me.
...snip...
This converting to sterling crap sounds like BS from the agency.

Yes, I should have said that the letter from HMRC that the agency copied me mentioned that the rules ahd changed some time ago and the method you outlined is no longer acceptable to HMRC.

Thanks,

Boo

[psychocandy]

Yes, I should have said that the letter from HMRC that the agency copied me mentioned that the rules ahd changed some time ago and the method you outlined is no longer acceptable to HMRC.

Thanks,

Boo

Another reason to avoid a euro contract in future then.... :-)

Exchange rate changes killed me though. Euro dropped and cost me £30-£40 a day. Of course, agent and client don't give a monkeys.

It was stupid really because I was working in the uk via uk agency for client that just happened to have head office in france.

[TheCyclingProgrammer]

Regarding point 4, I'd say you probably want to report the amount you invoiced (at the rate on that date) for VAT on your return.

Any differences in what you receive should be accounted for as a currency exchange gain/loss.

What I don't understand is as you are going through a UK agency why you can't invoice them in GBP and let them bill the end client in EUR.

[Boo]

Regarding point 4, I'd say you probably want to report the amount you invoiced (at the rate on that date) for VAT on your return.

Any differences in what you receive should be accounted for as a currency exchange gain/loss.

Yes, that's what my accountant said today.

What I don't understand is as you are going through a UK agency why you can't invoice them in GBP and let them bill the end client in EUR.

Because then the agency would stand the exchange rate variation for the whole value of the contract whilst only being paid their margin, and that is untenable for them.

Boo