Client is UK registered company and is VAT registered and accounts in £.
Its customer is UK registered company and is VAT registered and apprently accounts in $ as client is required by customer to invoice in $.
Client books $ sales invoices in £ at the amount actually received and pays over the VAT in its VAT returns as normal
It appears that customer uses HMRC rates to convert its $ transactions and as these rates diiffer from the actual rates that apply to the payments the VAT paid by the client is not the same as the VAT recovered by the customer.
Is one of them wrong? If so which one?
Is there a problem? If so whose problem is it?
Replies (3)
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HMRC expect the VAT paid to them to be the amount on the invoice. Any difference when payment is received goes to exchange differences.
When making the sale
Cr - Output VAT (£) calculated using the approved rate.
Cr Sales (£)
Dr Sales Ledger
When you receive the funds
Cr Sales Ledger
Dr Bank
Dr Gain / Loss on exchange.
I am not seeing the VAT problem? I wouldn't expect to know or care how the end customer treats the VAT in his books.
when you raise your $ invoice its $ 100 + $20 vat = $ 120 receivable
on the face of the invoice you state VAT $20 = £ x
you/Biller pay £x via your vat return
as stated, if / when, you do receive payment of $120 or£ the £ itself, equivalent difference on your Debtors is a currency adjustment w/off and balnce in all currency sb NIL