Converting foreign currencies into sterling for VAT purposes is slightly different if you are using The Tour Operators' Margin Scheme (TOMS).
If any of the supplies that you buy in order to resell as TOMS supplies are billed to you in a foreign currency, you'll normally need to convert the cost into sterling to work out your margin.
You must use one of the following five methods to convert to sterling:
- the Federation of Tour Operators' base rate as published in the Financial Times, applying the rate at the time your supplier costed the goods or services
- the commercial rate of exchange current at the time the supplies in your brochure were costed
- the rate published in the Financial Times on the date you pay for the supplies
- the rate of exchange that applied when you bought the foreign currency that you used to pay for the supplies
- the period rate of exchange for the time when you paid for the supplies
You must keep documentary evidence relating to the purchase of the currency to show which rate you have used.
Once you have decided which method you want to use, you will only be allowed to change to a different method at the start of your next financial year - that is, no later than the due date of your first VAT return for that financial year. You won't be able to change the method retrospectively.