Credit Note raised in foreign currency

[Dave-A]

Hi Folks,

We raised a credit note in Euros which identically matched the original Eur invoice, albeit it was done several months after the invoice. The invoice included VAT, & so did the credit.

We accounted for VAT on the invoice at the HMRC VAT rate for the month. Should we process the credit note at the HMRC rate for this month, or at the rate we used for the invoice?

Note that the invoice was never paid, so using this month's rate will give us a VAT "profit" in sterling !

Thanks,

Dave-A

[pawncob]

Well it's not even a "paper" profit really. Just match the original invoice.

[Dave-A]

Hi pawncob - it's more than a paper profit surely !

Whilst the transactions are denominated in Euros, we have PAID a sterling amount in VAT based on the prevailing exchange rate (pre-BREXIT!) which was more advantageous to us whilst the VAT was a liability from our sales invoice (@ approx. €1.35).

The credit note crystallises a VAT debtor, which comes back to us at say €1.15 so we get back more in pounds than we paid out (if we use the current fx rate).

Surely there is a rule on this ?

Regards,

Dave-A