How to create a foreign currency expense
This article explains how to create an expense in a currency other than your base currency.
You might have travelled abroad and incurred some expenses while you were there, or you might have bought something in a different currency without travelling, for instance a purchase you made online.
1. Add a new expense
Start by creating an out-of-pocket expense as normal.
2. Enter the currency and amount
Choose the currency that you used to pay for the expense. If this is a currency other than your base currency (which is the currency you prepare your accounts in), you'll see two new options appear.
These are the total value in your base currency, and the option to choose whether you want to keep the value that FreeAgent has automatically calculated for this, or put in a different value. For example, you may know from looking at your personal credit card statement that the value you spent in your base currency is slightly different from FreeAgent's value.
If you want to override the value that FreeAgent has calculated, deselect Automatic Currency Conversion and add a new Total Value amount.
If you're registered for VAT then you need to be careful here.
If you have made an online purchase, then the rules for buying goods and services from the EU may apply. If you have bought goods in from outside the EU then you may also be able to claim UK VAT on this if you have an import VAT certificate, form C79. Please note, it's UK VAT that you are reclaiming here, which is why the amount will be in £ sterling. You should ignore any local sales tax your supplier may have charged you. Put the UK VAT into the 'VAT Reclaimable' box.
If you have travelled abroad and spent money there, on which you incurred local VAT, you can’t reclaim that VAT in the UK using your normal VAT return, so make sure you leave the amount in the 'VAT Reclaimable' box as £0.
If your journey was to a country in the EU then you may be able to use HMRC's Refund Scheme to reclaim the VAT.
Recurring expenses will always be converted using the exchange rate on the day they recur. For example, a $100.00 recurring expense will probably fluctuate slightly to reflect the current exchange rates.
Create your new expense
When you're ready, continue as normal to finish creating your new expense.
Money Paid to User
The money that your business can repay to you will always be worked out in your base currency. When you've finished creating the expense, the balance the business owes to you will include the amount in your base currency.