Invoicing in another currency, without getting the VAT wrong

The rule almost everyone misses

VAT Notice 700 section 7.6 is blunt about it: for VAT purposes, amounts of money must always be expressed in sterling. That has legal force through VAT Act 1994 Schedule 6 Paragraph 11. So an invoice that states its VAT only in euros is not a complete UK VAT invoice, and your customer cannot properly support their input tax claim from it. The sterling figure has to be on the document.

Which exchange rate you are allowed to use

Section 7.6 gives three options. The first is the default; the second is one you may adopt without telling HMRC first, but cannot then move off without HMRC's written agreement.

• The UK market selling rate at the time of supply, where published newspaper rates are accepted as evidence
• The period rate of exchange that HMRC publishes for customs purposes, which is fixed for a calendar month
• A rate or method you already use commercially, if HMRC has approved it in writing

You choose the basis, and you can override it per invoice

Taxmo gives you two, and the choice is yours rather than ours. HMRC's published monthly rate is the second option above exactly as written: the figure came from HMRC rather than from a source anyone chose, and being fixed for the whole calendar month makes the "rate at the time of supply" requirement a straight lookup rather than a judgement. The ECB daily reference rate is a daily market rate, the same source Sage uses, and it is what new accounts start on. Be precise about what it is, though: the ECB publishes a mid-market fixing, not a rate a bank would sell you sterling at, so it is not literally the "UK market selling rate" the first option names. It is independently published and objectively verifiable, which is what HMRC weighs when it looks at a rate, but if you need certainty about your own basis, confirm it with your accountant. Whichever you are on, you can override the rate on an individual invoice when you transacted at a different one, and Taxmo records that it was your own rate rather than a published one.

Why the basis is a setting and not a default we picked for you

Because section 7.6 makes it hard to undo. Adopting HMRC's period rate needs no permission, but moving off it later needs HMRC's written agreement. Software that quietly puts every user on it has made a commitment on their behalf that they then need HMRC's consent to unwind. So it is a setting on your business profile, it says which basis you are on, and it says what changing it means. Accounts that predate the setting stay on the basis they have already been invoicing on rather than being migrated.

When no rate has been published, we ask rather than guess

This is a deliberate choice and worth knowing about, because the alternative is common and quietly expensive. If a rate is unavailable for the currency and date on whichever basis you are on, Taxmo stops and asks you for the rate you used. It does not fall back to an estimate. An invented rate does not announce itself: the invoice looks finished, the VAT return looks finished, and the figure is wrong in a direction nobody chose. Being asked a question is the cheaper outcome.

What appears on the invoice

The invoice is denominated in your customer's currency throughout, because that is what they are paying. Underneath the totals, for any non-sterling invoice, Taxmo adds the sterling VAT, the rate applied and where that rate came from.

• Totals and line items in the invoice currency, formatted the way that currency is normally written
• Total VAT in sterling, as UK VAT rules require
• The rate applied, stated as one pound to so many units, so the figure can be checked
• Which basis produced it: the HMRC month it covers, the ECB fixing date, or that it was your own rate
• The amount actually payable, which stays the foreign-currency total

Currencies that stop existing

Currencies are retired, usually by joining the euro, and software tends to keep offering them for years afterwards. The Bulgarian lev is the current example: HMRC published a rate for January 2026 and then stopped, and the ECB dropped it too. Taxmo will not let you raise a new invoice in a currency no longer published on either basis, because there would be no defensible way to convert it, but invoices you already issued in it keep their stamped rate and still render correctly.

Where the converted figures end up

The sterling equivalents feed everything downstream: your running tax estimate, your profit and loss, and Box 6 and Box 1 of your VAT return. Foreign exchange differences between the invoice date and the payment date are booked separately rather than being folded into turnover, so your sales figure stays a sales figure.

Common questions