Settlement Discounts

Hi all
I am struggling with a settlement discount question!
In the AAT level 2 Text book - Section 2 - Test 4.
I can do (a) but (b) is working out a settlement discount, when previously using the question bank book I could get the VAT total but the Gross - the settlement discount total would always be wrong! It turned out it was the way I was working out the sum, But working it out both ways I am still not getting it!
Help or advice anyone


  • JC101JC101 Posts: 22AAT Student
    edited January 2016
    I don't know which book you're looking at.
    If you write out the question I'll try and help.
  • CeeJaySixCeeJaySix Well-Known Posts: 645Registered

    1. Calculate VAT (total net x 20%)
    2. Calculate actual net (ie. if a 5% settlement discount is offered and the conditions for it are met, total net x 95%). The amount you have deducted is the settlement discount total. If the conditions aren't met then the discount isn't taken advantage of and the net amount doesn't change.
    3. Calculate actual gross - actual net plus VAT above.
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