VAT

System

Can anyone help me understand "Discount and VAT"

If a discount is offered for prompt payment of the invoice, VAT is computed on the amount after deducting the discount (at the highest rate offered) even if the discount is not taken.

So does this mean that if 10% discount is offered for payment within 7 days and a 5% discount is offered for payment with in 14 days you calculated the VAT for the 10% discount even if the 5% discount if given?

Please help

Thanks

Karen

System

Re:VAT

Hi

you are correct in saying that the VAT would be calculated on the 10% discount as you charge VAT at the lowest possible amount that the customer could pay on that invoice, otherwise you would be charging VAT at a higher rate than 17.5% should the customer take on the offer of paying within 7 days.

Hope this helps.

Kelly

System

Re:VAT

That's correct - VAT on settlement discounts is always calculated after deducting the highest rate discount.

System

Re:VAT

I think there are different schemes that you can chose to use and one of them is this from the Cusotms site if it helps

Pay your VAT when your invoices have been paid: the Cash Accounting Scheme
Under the cash accounting scheme you account for VAT on the basis of payments you receive and make, rather than on invoices you issue and receive.

The main benefit of this scheme is that you don’t have to pay VAT on invoices you have issued until your customers pay you, although it also means you can’t reclaim VAT on purchases until you pay your suppliers.