Exchange Rate Variances

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HadynB
HadynB Registered Posts: 38 Regular contributor ⭐
in General accounting discussion
Hi

A quick question; should exchange rate variances appear on your VAT return. To explain a bit further, a new company I've started for process invoices in the relevant currency and then have to re-post when the invoices are paid in GBP (both sales and purchases). They are coded back to the relevant nominal (instead of the exchange rate variance nominal but hey ho). Currently they default to either a T0 in Sage, or the applicable import/export T code which I know isn't correct as they will show up as a import/export in the month they are paid; should they be T9 (i.e. don't appear on the VAT retunr) as they are just adjustments?

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  • NeilH
    NeilH Registered Posts: 553 Epic contributor 🐘
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    Hi

    The variances themselves should not appear on the VAT return, they are not in themselves inputs or outputs. Any foreign currency inputs/outputs should be in GBP, converted from the foreign currency using either the HMRC rates or another appropiate method (e.g. actual spot rate).

    I assume from you "T0" and "T9" comment that you are using Sage? It's been a while since I used sage but will the system not take care of FX rates without the need to post? The system I currently use posts the invoice at a particular FX rate, if the FX rate has changed at receipt/payment date a FX variance is automatically calculated and posted to the FX gain/loss account.

    Neil
  • HadynB
    HadynB Registered Posts: 38 Regular contributor ⭐
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    Hi NeilH,

    Thanks for the reply. Yes I am currently using Sage, and unfortunately the version used does not handle foreign currencies at all well, and the way the system works at the mo, they don't use the fx nominal as they are happy with the charge going straight to cost of sales, or sales. I would correct this but they are getting a new system shortly and my boss assures me that the system will be improved and automated. At least I can ensure the VAT returns are correct from when I took over.

    Now I need to go look into reverse charges :(

    Thanks for your help.

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