cash settlement discounts

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in AAT member discussion
:D


Unit 1
Hi everyone
Cannot seem to get my head around cash settlement discounts.

Trade discounts OK
Is there a simple example to remember what to do.
My problem is working out the VAT and including the discount.

Sorry if this sounds a bit basic.

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:cash settlement discounts


    Where a cash discount is offered, VAT is chargeable only on the discounted amount, whether the discount is taken or not.

    For example, a trader sold furniture for £16,000 less settlement discount of 5% to a UK wholesaler who did not deduct this discount when making payment. Calculate how much VAT is due on this transaction.

    VAT due is 17.5% X £15,200 = £2,660

    The invoice total will therefore be: £16,000 + £2,660 = £18,660

    The amount of £15,200 is made up of: £16,000 less 5%

    Notice that the goods value still remains at £16,000 for invoice purposes (not the discounted amount of £15,200.

    Hope this helps.


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