Paying VAT when you invoice in Euros

[psychocandy]

WTF? Is this right? Response from accountant :-

> I have calculated the VAT for this quarter based on the daily exchange
> rate on the date of the invoice. Therefore the VAT has been prepared on
> an invoice basis.
>
> You can however use the cash based turnover method which is essentially
> flat rate scheme on a cash accounting basis for VAT. Therefore you
> would only pay VAT on items once your customers have paid you. If your
> customer is a late payer this is probably a good way for you to account
> for VAT. Again on this method I would use the daily exchange rate on
> the date on which you'd been paid. Therefore if you wished to use this
> method you would just need to provide me with the dates that you have
> been paid and the amount which you have been paid.

I thought the exchange rate still depended on the rate at the tax point (i.e. invoice) regardless of whether you were using cash accounting? My accountant is saying rate can depend on date of payment?

BTW. I've already sent him a copy of the bank statement showing payment date (twice!).

I think I need to speak to VAT people because I'm not sure still...

[SueEllen]

WTF? Is this right? Response from accountant :-

> I have calculated the VAT for this quarter based on the daily exchange
> rate on the date of the invoice. Therefore the VAT has been prepared on
> an invoice basis.
>
> You can however use the cash based turnover method which is essentially
> flat rate scheme on a cash accounting basis for VAT. Therefore you
> would only pay VAT on items once your customers have paid you. If your
> customer is a late payer this is probably a good way for you to account
> for VAT. Again on this method I would use the daily exchange rate on
> the date on which you'd been paid. Therefore if you wished to use this
> method you would just need to provide me with the dates that you have
> been paid and the amount which you have been paid.

I thought the exchange rate still depended on the rate at the tax point (i.e. invoice) regardless of whether you were using cash accounting? My accountant is saying rate can depend on date of payment?

BTW. I've already sent him a copy of the bank statement showing payment date (twice!).

I think I need to speak to VAT people because I'm not sure still...

Definitely speak to the VAT people and ask them if there is a relevant booklet number as explanation.

Then send that to your accountant.

I would be tempted to move accountants if they can't understand VAT or take over calculating myself.

[psychocandy]

Definitely speak to the VAT people and ask them if there is a relevant booklet number as explanation.

Then send that to your accountant.

I would be tempted to move accountants if they can't understand VAT or take over calculating myself.

My first quarter VAT payment is due shortly. If I pay this and consequently find that I've screwed things up slightly by using wrong dates and/or exchange rates, will the VAT people be nice about and let me sort it out? Or am I facing serious grief?

[SueEllen]

My first quarter VAT payment is due shortly. If I pay this and consequently find that I've screwed things up slightly by using wrong dates and/or exchange rates, will the VAT people be nice about and let me sort it out? Or am I facing serious grief?

I doubt your underpayment will be a significant amount so in that case you are advised to:
1. Make a clear note in your records of why you screwed up to show it wasn't a deliberate mistake.
2. Amend the VAT amounts on your next return to include the underpayment.
3. Pay all the VAT including the underpayment.
4. Say nothing to the VAT man unless they come to do an inspection.

I would also note in your records what you did to ensure you didn't make that mistake again.

[psychocandy]

I doubt your underpayment will be a significant amount so in that case you are advised to:
1. Make a clear note in your records of why you screwed up to show it wasn't a deliberate mistake.
2. Amend the VAT amounts on your next return to include the underpayment.
3. Pay all the VAT including the underpayment.
4. Say nothing to the VAT man unless they come to do an inspection.

I would also note in your records what you did to ensure you didn't make that mistake again.

Yeh. OK. The amounts arent going to be much but I want to be sure that its right and not have loads of hassle putting problem right.

[psychocandy]

> I have calculated the VAT for this quarter based on the daily exchange
> rate on the date of the invoice. Therefore the VAT has been prepared on
> an invoice basis.
>
> You can however use the cash based turnover method which is essentially
> flat rate scheme on a cash accounting basis for VAT. Therefore you
> would only pay VAT on items once your customers have paid you. If your
> customer is a late payer this is probably a good way for you to account
> for VAT. Again on this method I would use the daily exchange rate on
> the date on which you'd been paid. Therefore if you wished to use this
> method you would just need to provide me with the dates that you have
> been paid and the amount which you have been paid.

Hmmmm. As you can see from this email from my accountant he says hes used the exchange rate for the date of invoice (i.e. 31st May). Been trying to find the rates for that date. Difficult to find tourist but according to XE.com mid-market rate on that day (with tourist rate as allowed by HMRC expecting to be higher) it was 1.1438.

Strangely, though the amount of Sterling income hes put on my return and 12.5% of that to be paid, works out EXACTLY as if the rate of 1.1331 was used. Spookily, the monthly rate for June on the HMRC website is 1.1331 !!!!

Makes not a lot of difference (about £20 VATable income, £3 actual VAT) because it was an invoice for a few days.

However, I'm a little concerned that Ive been lied to here. As in, oops, no sterling amount on invoice because we forgot to mention this, never mind just use rate for june.

Sod it heres the exact figures (after all I aint giving my rate away here because its for a few days):-

Invoice on 31st May = 1950E

VAT return accountant has asked me to sign gives income as = £1720
VAT due at 13.5% = £232.22

Works out EXACTLY at 1.1331 used !!!

Anyway, I've asked them to confirm their source for exchange rate info for invoice date (31st May) now. Wonder if they're answer is going to be - oh our mistake we used the june rate after all...

[SueEllen]

>

Works out EXACTLY at 1.1331 used !!!

Anyway, I've asked them to confirm their source for exchange rate info for invoice date (31st May) now. Wonder if they're answer is going to be - oh our mistake we used the june rate after all...

What's your own calculation based on May's rate?

Remember you don't have to use your accountant to calculate your VAT as you can do it all yourself.

Also remember if your accountant pisses you off you can change to a different one. However check they understand about the things that concern you before moving.

[psychocandy]

Is is acceptable to use HMRCs monthly rate for one invoice but the daily rate for the another?

Or do you need to stick to one type of rate calculation for the entire quarter? Or even stick to one method one you've started.

Reason is, on invoice date, rate was 1.10, but HMRC rate is 1.12. (Bummer is its 1.14+ now!).

Although difference in VAT paid is about £20 more if I use the HMRC rate.

Alternatively, is there any way to find out the historical tourist rate (which you're allowed to use for that day? That would be better. Of course, if accountant had told me this I could have checked this on the day and put on invoice.

[ASB]

Is it acceptable to use HMRCs monthly rate for one invoice but the daily rate for the another?

Not really, you are supposed to be consistant. The VAT man prefers this to "whichever one happened to fit best at the time".

Or do you need to stick to one type of rate calculation for the entire quarter? Or even stick to one method one you've started.

Swapping is fine. Chopping and changing to suit the exchange rate isn't really. You should let them know if you do change your mind. From the earlier link:-

"You can use the period rate for all your supplies, or just for a specific type of supply. If you decide to use the period rate just for a specific type of supplies, you should make a note of the details in your records. You don't need to tell HMRC. However, if you change your mind at a later date you'll need to get the agreement of the VAT Business Advice Centre for your area."

Alternatively, is there any way to find out the historical tourist rate (which you're allowed to use for that day?

Some historical rates, might be what you are looking for.

British Pound (GBP) to Euro (EUR) exchange rate history

[SueEllen]

Some historical rates, might be what you are looking for.

British Pound (GBP) to Euro (EUR) exchange rate history

Unfortunately he's looking for a tourist rate, which tends to be less generous than the interbank rate and the rates you can find online.