A foreign company invoices for an amount in dollars, e.g. $12,000. The invoice is submitted to us through a UK, VAT registered company. On the invoice the Amount is stated in dollars, and also a breakdown in sterling showing the VAT, by using the relevant exchange rate e.g. $12,000 @1.2 = £10,000. This is then split into £8,333.33 + £1666.67VAT. I believe this is all correct and follows the rules.
When the $12,000 is paid, it will always be a different sterling amount. Does this currency difference (plus or minus) have to be taken by the company or can part of it be offset as a change in the VAT amount. Using the example above, if we ended up paying £10,120 to pay off the $12,000 invoice because of the difference in exchange rate, is some of the £120 extra classed as extra VAT?