Invoicing in USD

[Dicky Knee]

Hi All,

Does anyone have experience of invoicing a UK company in USD?

The background is that I do contract work (through my UK Registered company) for a UK Registered company who invoices offshore clients (VAT free) in USD.

I would usually invoice in GBP plus VAT. Simple.

In order to avoid aggravation with exchange rates the company I am doing some work for wants to pay me in USD. That is fine as I can open a USD account with my bank and I am happy doing the currency conversion at my leisure.

However, I assume I would still have to charge VAT on the USD invoice and I would be collecting VAT in USD which I would have to pay to HMRC in GBP. I also assume that the amount of VAT I charge when converted to GBP should match with the VAT refund being claimed by the company I am working for.

Hope you are still awake...anyway, is there a HMRC 'official rate' that should be used for the FX conversion or should I agree An FX rate with the company at the time I invoice?

Any pointers greatfully received.

p.s. I do have an accountant but getting radio silence at the moment.

Dicky

[Eric Mc]

You are still billing a UK customer - so you will need to add on the normal VAT you charge.

You can invoice a customer in any currency they like - but you obviously must account for the sale in your records, for accounting, tax and VAT purposes, in Sterling.

[Dicky Knee]

Thanks Eric. Is there a protocol for establishing the exchange rate or does it just have to be somewhere around the market rate at the time of invoicing?

[the_g_ster]

Two other things:

1. Sack your accountant, you should be able to contact them and get some help.

2. Hopefully your accountant will tell you about the exchange risk with this arrangement, eg, you need to make sure you understand who bears the risk for the currency translation back to GBP when you convert the payment. In your statement of work, you should make sure there is something that says you will invoice and get paid extremely quickly at the spot rate, so you don't see the value eroding from invoice to payment date.

If your day rates are in dollars, then make sure you have some extra profit in there for risk of your currency loses over time.

Though of course, you could make as well as loose on currency.

[Eric Mc]

Dicky Knee said:

Thanks Eric. Is there a protocol for establishing the exchange rate or does it just have to be somewhere around the market rate at the time of invoicing?

See the excellent answer above.

Pandering to customers' needs regarding currency can cost you if you are not careful.

[Dicky Knee]

Thanks again. I am happy dealing with the FX. I have worked in financial markets for 30 years so seen plenty of case studies on how not to do it!

[sgrimshaw]

Your invoice in USD should state the VAT amounts in GBP as well.

It also seems acceptable to quote the exchange rate used instead, although strictly speaking it should be the amounts themselves.

Info here:

http://www.hmrc.gov.uk/vat/managing/international/...

Edited by sgrimshaw on Wednesday 24th September 14:26

[Dicky Knee]

sgrimshaw said:

Your invoice in USD should state the VAT amounts in GBP as well.

It also seems acceptable to quote the exchange rate used instead, although strictly speaking it should be the amounts themselves.

Info here:

http://www.hmrc.gov.uk/vat/managing/international/...

Edited by sgrimshaw on Wednesday 24th September 14:26

Great. Thanks for the link.

[D1ckie]

We issues invoices showing net and vat in USD

Then on the same invoice show the exchange rate used, with the Sterling equivalent net and vat that we use in our accounts.

We also keep proof of how we obtained the exchange rate attached to the invoice for any future inspection

[Eric Mc]

Your UK customer will be reclaiming the VAT you charge them on the invoice you raise. If you only show the VAT in its US$ amount, they will need to carry out a conversion to Sterling before they can make the claim through their UK VAT return.

The problem is that they will almost definitely use a different US$/Sterling conversion rate to the one you have used. This means that the amount you pay to HMRC as Output VAT will be different to the amount they reclaim as Input VAT.

The VAT man does not like this.

That is why HMRC would expect you to provide a Sterling equivalent invoice to the customer so that the customer knows the correct Input VAT they should be reclaiming.

[Dicky Knee]

Thanks Eric. That is the missing link...I will show a GBP VAT amount.