VAT and settlement discounts

Sparkly

My colleague has come to me with a question regarding VAT on an invoice, I wanted to run it by someone to be sure!

We have an invoice from a supplier where we havea choice of payment terms 45 days, or 14 days less 1.5%. Our company has decuided not to take the discount and pay to 45 days terms. My colleagues concern is that the VAT on the invoice is calculated as if we will take the discount and she is concerned that she will have to enter on to our accounts system an amount that is higher than what is on the invoice and that she shouldn't do this.

I'm seem to remember that it is standard practice when issuing an invoice with a settlement discount that the VAT is calcualted as if you have taken the discount. What I 'm not sure about is if you, as the customer, are allowed to alter the VAT and pay the higher correct amount, or if you just pay the reduced VAT amount, which doesn't seem quite right!

Any advice please?

Monsoon

You are correct. You pay the discounted VAT, no matter whether you take the discount or not. It is incorrect to pay a higher amount of VAT, the VAT is always the VAT shown on the invoice.

Sparkly

Thanks Monsoon, so by that I just need to tell her that she pays the correct goods amount and manually adjusts the VAT that the system automatically calculates so that it matches what is on the invoice?

Monsoon

Yep, spot on.

Sparkly

Thanks very much

It's nice to know I was on the right track!