Notice

VAT Notice 920: the single currency

Published 1 February 1999

This notice was withdrawn on 29 May 2015

This publication was originally archived on 25 November 2014.

This publication was originally archived on 25 November 2014.

Foreword

What this notice is about

It provides essential information about HM Revenue and Customs (HMRC) requirements when invoicing and accounting in the single currency (the euro) or paying the following taxes and duties in euro:

• VAT
• Cider and perry duty
• Hydrocarbon oil duty
• Betting, gaming and lottery duties
• Tobacco product duty
• Customs duties (including agricultural levies)
• Spirits duty
• Insurance Premium Tax
• Beer duty
• Landfill tax
• Wine and made-wine duty
• Air Passenger Duty

VAT notices mentioned in this notice.

700 The VAT Guide

718 Margin Scheme for second-hand goods, works of art, antiques and collectors’ items

731 Cash accounting

732 Annual accounting

A list of useful contacts is at Appendix B.

Do you have any comments?

We would be pleased to receive any comments or suggestions you may have about this notice. Please write to:

Single Currency Programme Team
HM Customs and Excise
6W, New King’s Beam House
22 Upper Ground
LONDON
SE1 9PJ

1.Introduction

1.1 Membership of Economic and Monetary Union

Economic and Monetary Union came into effect on 1 January 1999 for eleven European Community countries - Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain. They have adopted a single common currency, the euro, which will be in cashless forms until notes and coins are introduced in January 2002.

The UK is one of the countries which did not join in the first wave (the others being Denmark, Greece and Sweden), but the introduction of the euro is likely to affect a wide range of UK businesses.

In order to facilitate use of the euro from its introduction on 1 January 1999, businesses can:

• issue shares in euro
• lodge company accounts in euro
• hold euro bank accounts; and
• pay taxes in euro

From 1 January, you can keep most business accounts in euro and pay taxes in euro, but you must continue to make all HMRC returns and declarations in sterling.

2.Accounting and invoicing

2.1 VAT and other taxes and duty accounts

VAT accounts, all excise records and other tax and duty accounts must continue to be maintained in sterling.

2.2 VAT invoicing and credit notes

If you issue VAT invoices and credit notes in euro for supplies of goods or services within the UK, the invoice or credit note must also show the sterling equivalent of the total net value of goods and services at each rate of VAT and the amount of VAT, if any, at each rate. We will not insist on sterling conversion for each description on the invoice on a line by line basis. If you issue invoices and credit notes in euro for supplies of goods and services to persons in other Member States and you charge VAT (when, for example, you don’t have a valid VAT registration number for your customer) the above requirements also apply.

The sterling VAT amount on tax invoices is the value to be used for both suppliers’ output tax and customers’ input tax.

2.3 Values expressed in a foreign currency

If you need to convert an amount from euro into sterling on the invoices and credit notes you issue, or on invoices and credit notes received by you from suppliers in other Member States (for the purposes of calculating acquisition tax - see paragraph 2.4) you should apply the rules in Notice 700 The VAT Guide, as follows:

(a) unless you have adopted one of the alternatives set out below, you must use the latest published UK market selling rate at the time of the supply. The rates published in national newspapers will be acceptable as evidence of the rates at the relevant time. This rate is also available by phoning Customs on Telephone: 01702 366349;

(b) as an alternative, you may use the period rate of exchange published by Customs for customs purposes. The Customs and Excise Business Advice Centre for your area can give details of particular period rates. You may adopt this alternative for all your supplies or for all supplies of a particular class or description. If you opt in respect only of a particular class or description, you should make a note in your records at the time of adoption of the class or description to which your option relates.

You do not need to notify Customs in advance if you wish to adopt this alternative, but having elected for such an option, you cannot then change it without first obtaining the agreement of the VAT Business Advice Centre for your area;

(c) you may apply in writing to the VAT Business Advice Centre for your area to use a rate, or method of determining a rate, which you use for commercial purposes but which is not covered by (a) or (b) above. In considering whether to allow such applications, local VAT offices will take into account whether the proposed rate or method is determined by reference to the UK currency market; whether it is objectively verifiable; and the frequency with which it is proposed to update it. Forward rates or methods deriving from forward rates are not acceptable.

Whatever rate or method you adopt, the appropriate exchange rate for any supply is the rate in force at the time of the supply, except when issuing credit notes in euro where you must refer back to the VAT amount charged on the original invoice.

2.4 Invoices you receive from customers in other Member States

You should not normally receive an invoice showing VAT from a VAT registered company in another EC country. In general, VAT is not applied to supplies of goods between VAT registered businesses in different Member States at the time of despatch. However, VAT is due from your customer on acquisition of the goods and you should account for acquisition VAT in sterling on your VAT return.

The conversion date from euro to sterling for acquisitions from another Member State should be the fifteenth day of the month following the one in which the goods were despatched, or the date the supplier issued an invoice (including invoices issued before the goods were sent) whichever is the earlier. More details about converting invoices are given in paragraph 2.3.

2.5 Advance invoicing

The VAT invoice rules require invoices expressed in foreign currencies to also show the value of the supply in sterling at the time of the supply. When invoices are issued in advance of the time of supply, for example for leasing or rental payments, and contain a number of future tax points, clearly it will be impossible to convert euro amounts accurately into sterling at the time the invoice is issued. Therefore, to be eligible as VAT invoices, invoices issued in advance of the supply must be expressed in sterling. The sterling amounts are then fixed at the time of the invoice and any euro amounts on the invoices will not be relevant for VAT purposes. The actual layout of the invoice under these circumstances is a matter for the supplier to decide but it must be clear for VAT purposes that the value of the supply is expressed in sterling and not in euro converted to sterling.

2.6 VAT cash accounting scheme

The VAT cash accounting scheme allows eligible businesses to account for VAT on the basis of when payments are received and made, rather than when invoices are issued and received. (For more information on the cash accounting scheme see Public Notice 731).

Full payment is made or received

If your customer or supplier is another UK business, any VAT invoices expressed in euro must also show the sterling equivalents as at paragraph 2.2 above. Therefore, if the invoice is paid in full, you will not need to convert any payment in euro into sterling for the purposes of the cash accounting scheme. You must always declare the sterling amount of VAT due on the supply as shown on the invoice.

Partial payment is made or received

If you receive or make partial payments in euro against an invoice expressed in both euro and sterling, you will need to calculate the amount of VAT included in the payment for the purposes of the cash accounting scheme. To do this you should determine what proportion of the total amount due on the invoice is being paid, and apply that proportion to the total VAT due. For example, if the payment in euro represents half of the total euro amount due on an invoice, you must declare half of the sterling VAT figure as shown on the invoice.

If, however, you receive or make partial payments in euro against an invoice which is expressed only in sterling, you will need to convert the euro payments into sterling using one of the methods outlined at paragraph 2.3 above. For the purposes of the cash accounting scheme, you must be consistent in the method used. But whatever method you adopt, the exchange rate to be used is that current at the time of the supply by, or to, you. This may not be the same as the exchange rate which applies at the time you receive or make payment. Once you have established what the sterling equivalent of the euro payment is and what proportion of the total amount due this represents, you can then determine how much of the payment is VAT.

2.7 VAT Margin Scheme for second-hand goods, works of art, antiques and collectors’ items

If you are buying and selling goods under the Margin Scheme for second-hand goods etc. in euro, you must convert any such values to sterling to show the prices for items bought or sold, in order to calculate your margin. This may need to be done for each item or, under the Global Accounting Scheme, certain items as detailed below.

(a) Purchase invoices

When you buy goods which you intend to include in the Margin Scheme, you must obtain a purchase invoice. If that invoice is in euro, you must convert the values to sterling using the rules as set out in paragraph 2.3 above. If you buy a number of items at an inclusive price and do not intend to sell them as one lot, you must convert the price to sterling and then apportion this amount between the items.

You must enter the sterling amounts on an item by item basis in your stock record.

(b) Sales invoices

Under the Margin Scheme rules, you must issue a sales invoice when you sell eligible goods under the scheme. If you issue such invoices in euro, the invoice must also show the sterling equivalent of the value of the goods and this sterling amount should be used in calculating the appropriate margin. When you sell more than one item on the same euro invoice, you must show the euro and sterling price for each item on that invoice and enter the sterling amounts in your stock record.

If, however, you are selling as one lot goods which you bought as one lot (see (a) above), you need only show a total euro and sterling value for that lot.

(c) Global Accounting

If you are using Global Accounting your invoices will normally only show a total price for the goods you buy and sell under the scheme. But individual items with a purchase value over £500 are not eligible for this scheme and you will need to deduct the value of such items from the purchase invoice total. To do this you should convert any total value in euro into sterling and then apportion this figure so as to exclude the item or items with individual purchase values over £500. The net purchase amount in sterling must be entered in your purchase records.

If you issue a Global Accounting sales invoice you must show the sterling equivalent of the total value of the goods and enter that sterling amount in your sales record.

(d) Auctioneers’ Scheme

Invoices under the Auctioneers’ Scheme issued in euro must show the sterling equivalent of each element of the invoice (for example, the hammer price of the goods and the amount of commission or other charges due) and not just the total value of the supplies made.

To convert amounts in euro you must use one of the methods outlined at paragraph 2.3. But, whatever method you adopt, the exchange rate to use is that current at the time of supply.

The invoicing and record keeping requirements for the above schemes are explained in Notice 718.

2.8 Excise invoicing

If you issue invoices showing euro amounts, the invoice must also show the sterling equivalent of the total value of excisable goods at each rate of duty, and the actual amount of duty, in sterling, charged at each rate. However, Customs will not insist on sterling conversion of the invoice on a line by line basis.

If you intend to claim back duty under excise drawback or other duty reliefs, you must calculate your claim on the sterling duty values declared on your supplier’s invoice.

3.Declarations, returns and payments

3.1 Declarations and returns

VAT, excise duty and other taxes including Landfill Tax, Insurance Premium Taxes and Air Passenger Duty.

Regardless of which currency you choose to pay your VAT, excise duty or other taxes, returns and declarations must still be expressed in sterling.

Customs declarations

There are special rules for customs declarations, as follows:

• Statistical value - for imports, box 46 (Statistical Value) of the Single Administrative Document (SAD) must show the currency of the Member State of destination (that is, for imports into the UK, sterling must be declared). However, most imports will be processed through Customs Handling Import and Export Freight (CHIEF), which will calculate the box 46 value, except where the Customs Procedure Code (CPC) requires the figure to be entered manually. Therefore box 46 should normally be left blank.
  For exports, the currency of the Member State of export must be declared (in effect, Box 46 will be in sterling, as for imports).
  Declarations for Community Transit purposes are governed by the same legal framework and must continue to be made in sterling.

• valuation for customs valuation purposes for currencies other than sterling, box 22 (currency and total amount invoiced) of the SAD will continue to be used. Euro values will be denoted with the currency code ‘EUR’.
  Euro invoices can be used to support valuation for customs purposes. The exchange rate for the euro will be set on CHIEF and published by Customs in the same way as other exchange rates.
  These arrangements mean that any import entries supported by euro invoices presented on or after 1 January 1999 will be processed through CHIEF in the normal manner.

3.2 Intrastat declarations and EC sales listings

Intrastat declarations and EC sales listings must continue to be made in sterling. If you need to convert your accounts from euro in order to complete your Intrastat declarations and EC sales listings, you should follow the guidance given in paragraph 2.3.

3.3 Payments

General

From 1 January 1999, you can pay all taxes and duties in euro, including arrears, although repayments of tax or duty due to you will continue to be made in sterling.

Euro notes and coins will not be introduced by the participating countries until January 2002. Until then, payment can only be made using cashless forms, including cheques drawn on a euro account; CHAPS (Clearing House Automated Payment System); and Bacs (Bankers Automated Clearing System) direct credit. To be able to pay using CHAPS and Bacs, you will need HMRC euro account details (see Appendix A for more details).

Banks are not offering Bacs direct debit from 1 January 1999. This means that if you are required to pay by direct debit, for example if you have a duty deferment facility, you will need to continue to do so in sterling. If you use a scheme which offers payment by direct debit as an option, for example the VAT annual accounting scheme, you will have to select one of the other payment options if you wish to pay by euro. Further details are given in Notice 732, paragraph 4.

VAT Payments on Account

If you are in the Payments on Account scheme for large VAT payers, you may also pay your monthly interim payments in euro. You may then wish to know the precise sterling value of the interim payments you have made to calculate your balancing payment at the end of the quarter. To find out the exact amounts credited to your account, you can ring the Large Payers Unit on Telephone: 0151 703 8333, no earlier than one week after the date of the second interim payment. (For further information on managing exchange rate fluctuations, please see paragraph 3.5.)

Customs duties

We will accept payments in euro at the time of clearance of goods in the form of CHAPS, Bacs direct credit or euro denominated guaranteed cheques or bankers drafts. The amount to be paid will be based on converting the sterling tax due using the euro exchange rate applicable on the date of payment. Your bank will be able to arrange these forms of payment. We have set up the appropriate accounts with our bankers to handle such payments and details of these are given in Appendix A.

For CHIEF (Customs Handling of Import & Export Freight) direct trader input (DTI) entries where immediate payments are made through the Flexible Accounting System (FAS), deposits will be able to be made in euro. They will be converted to sterling using the exchange rate in operation on that day. To ensure that entries are cleared, euro deposits paid into FAS accounts must be sufficient to cover the sterling tax due. Failure to maintain sufficient sterling balance may delay clearance of goods. DTI agents will be responsible for any exchange rate losses affecting clearance of goods.

Debtors will be able to pay arrears of duty from 1 January 1999, for example, debts notified by Form C18, in the same way as payments of duty. The same principle will apply to payments by instalment.

Traders will not be able to pay Miscellaneous Cash Deposits (MCDs) in euro. This is because of the practical problems of accepting, adjusting and repaying security in euros with a floating exchange rate.

Similarly, guarantees which are available as an alternative to providing security for duty by cash deposit should continue to be arranged in sterling because euro guarantees would represent a variable against a potential fixed sterling customs debt liability.

You should note that Customs duty liabilities (the amount of customs duties legally due) will not be discharged if the sterling amount received by Customs after conversion is less than the amount legally due.

Other payments

You can make payments to Customs for statistical data in euro by cheque, CHAPS or Bacs credit. While Customs will bear the costs of converting euro payments to sterling, any risk associated with exchange rate fluctuations must be borne by the payer as detailed at paragraph 3.5.

3.4 Exchange rate to be used for payments

Should you decide to pay in euro, you should convert the amount due to Customs on your return or declaration (which must be expressed in sterling) to euro. When doing so, you should use the UK market selling rate (which can be obtained from the Financial Times or by phoning Customs on Telephone: 01702 366349) on the date you decide to pay.

3.5 Exchange rate fluctuations

Because the choice of currency used for tax and duty payments is a commercial decision, any risk associated with exchange rate fluctuations must be borne by the taxpayer. Customs will continue to maintain its accounts in sterling, and if you make a euro payment you will be credited with the actual sterling value we receive after conversion by our bankers. There can be no exceptions to this rule. If the exchange rate fluctuates in the time between a euro payment being sent or initiated and the time Customs receives the sterling equivalent, we will amend the accounting record to reflect the resulting over or underpayment. However, Customs may not take action immediately on these over or under payments if they are of a low value.

You can minimise the time taken for us to receive the euro payment by using the same day payment system, known as “CHAPS euro” (euro Clearing House Automated Payment System). Payments made through this system will be processed quickly, which should help to minimise exchange rate fluctuations. You can find out more about how to use this payment method in Appendix A. Other banking methods and cheques will take longer to clear, normally around 3 days.

3.6 Default surcharges, penalties and interest

Provided your euro payment reaches us by the due date and you have used an exchange rate which was correct when you sent your payment, penalties or surcharges will not normally apply if the amount declared has been underpaid solely as a result of a fluctuation in exchange rates.

Interest will not be charged or paid by Customs in respect of under/over payments arising from exchange rate fluctuations.

3.7 Conversion costs

The costs incurred by Customs in converting euro tax and duty payments into sterling will not be passed on to businesses but will be met by us.

3.8 Repayments

Any repayments of tax or duty due to you will continue to be made in sterling.

Further help and advice

If you need further help or advice or more copies of HMRC Notices, please contact the VAT, Customs and Excise Helpline on Telephone: 0300 200 3700. Our notices and other information are available on the internet (http://www.hmrc.gov.uk)

For VAT-registered businesses The VAT Enquiries Guide (Notice 700/51) explains what sort of information and advice services we provide.

If you have a complaint

If you have a complaint which the staff at your local office or at the port or airport cannot resolve you should contact the Regional Head for the region. Your local office will tell you how to contact the Regional Head. Ask for a copy of our code of practice on complaints (Notice 1000). If the Regional Head does not settle your complaint to your satisfaction, you can then ask the Adjudicator to look into it.

The Adjudicator, whose services are free, is an impartial referee whose recommendations are independent. The address is:

The Adjudicator's Office
PO Box 10280
Nottingham
NG2 9PF

Telephone: 0300 057 1111 Monday to Friday (apart from Bank Holidays) 9am to 5pm.

Fax: 0300 057 1212

Internet: adjudicator’s office

Glossary

Throughout this notice the following abbreviations have the meanings shown:

Abbreviation	Meaning
APD	Air Passenger Duty
B&G	Betting and Gaming
Bacs	Bankers Automated Clearing System
CHAPS	Clearing House Automated Payment System
CHIEF	Customs Handling Import & Export Freight
CPC	Customs Procedure Code
DTI	Direct Trader Input
EC	European Commission
ECU	European Currency Unit (superseded by the euro)
EMU	Economic and Monetary Union
FAS	Flexible Accounting System
HCO	Hydrocarbon Oils
IPT	Insurance Premium Tax
LFT	Landfill Tax
SAD	Single Administrative Document
TAPS	Trader Accounts Payments System
VAT	Value Added Tax

Appendix A: Banking Arrangements

(referred to in paragraphs 3.3 and 3.5)

Cheques denominated in euro

All euro denominated cheques must be sent to the HMRC location where current sterling cheques are paid, for example, VAT Central Unit for VAT, Liverpool for beer duty and Greenock for betting and gaming.

Electronic payment of VAT liabilities

CHAPS euro

Must be transmitted to:
Account:	HM C&E VAT CHAPS EURO
Bank Identifier Code:	BKENGB2L
Bank account Number:	23031018

The CHAPS reference field must include your VAT registration number, the VAT period to which the payment relates and the sterling liability of the debt being paid.

(Please see notes at the end of this section).

Bacs euro (credit)

Must be transmitted to:
Account	HM C&E VAT Bacs EURO
Bank Sort Code	10 00 00
Bank account Number	23031123

The Bacs reference field must include your VAT registration number, the VAT period to which the payment relates and the sterling liability of the debt being paid.

(Please see notes at the end of this section).

Electronic payment of Insurance Premium Tax (IPT), Air Passenger Duty (APD), Landfill Tax (LFT) and Trader Accounts Payments System (TAPS) liabilities

CHAPS euro

Must be transmitted to:
Account	HM C&E CENTRAL TAXES EURO
Bank Identifier Code	BKENGB2L
Bank account Number	23031344

Bacs euro (credit)

Must be transmitted to:
Account:	HM C&E CENTRAL TAXES EURO
Bank Sort Code	10 00 00
Bank account Number	23031344

The Bacs/CHAPS reference field must include a description of the tax being paid, your reference number, the period to which the payment relates and the sterling liability of the debt being paid.

(Please see notes at the end of this section).

Electronic payment of import and excise duties/Flexible Accounting System/beer/hydrocarbon oils/betting and gaming/tobacco etc

CHAPS euro

Must be transmitted to:
Account:	HM C&E IMPORT & EXCISE DUTIES EURO
Bank Identifier Code:	BKENGB2L
Bank account Number:	23031468

Bacs euro (credit)

Must be transmitted to:
Account:	HM C&E IMPORT & EXCISE DUTIES EURO
Bank Sort Code:	10 00 00
Bank account Number:	23031468

The Bacs/CHAPS reference field must include a description of the tax being paid; your reference number; the Customs location where payment is due; the period to which the payment relates; and the sterling liability of the debt being paid.

A faxed advice is critical for payments to this account to enable the Department to advise local offices of payments received (please see Notes below).

Notes

• clearly the speedy allocation of your electronic (Bacs or CHAPS) payment to the appropriate debt is very important. If there is insufficient space in the Bacs or CHAPS reference fields to supply the full data required you should also FAX payment details to 01702 366378.
• initiation of CHAPS payments prior to noon will reduce the risk of significant exchange rate movements as it will facilitate same day conversion to sterling by Customs and Excise.
• taxes and duties by Bacs direct debit: Because of banking and IT constraints, Bacs direct debit, used by VAT traders, importers, forwarding agencies, excise warehouse keepers and some proprietors of excise goods who operate the duty deferment facility, will not be available on 1 January 1999. This means that any businesses wishing to pay, or who currently pay, their taxes and duties by direct debit will need to do so in sterling.

Appendix B: Useful contacts

HMRC website

HM Treasury: Euro brochure-line: Telephone: 08456 01 01 99

HM Treasury’s euro website (archived)

EC Commission website: European Commission