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VAT Payment on cash discount invoices

  • 3 posts
  • # 72383

Hi Guys, i am wondering if those of you with your experience can help me!!

I have a supplier who offers me cash discount on their invoices. Now sometimes, the invoices are paid after the cash discount date, so the discount is not taken. However the VAT is calculated to assume that we will take the discount.

When we send payment, we pay the VAT as shown on the invoice, however the supplier is telling us we should be adding the VAT back on to the invoices before payment? None of our other suppliers request this, and i do not beleive that this is correct as i thought we pay the VAT that is shown on the invoice.

I would really appreciate it if someone could clarify this for me.

Thanks
  • 60 posts
  • # 72385

You are correct in thinking that the VAT should not be corrected.
Geoff
  • 180 posts
  • # 72386

From HMRC web site, VAT guide 7.3.2

(b) Discounts for prompt payment

If...

Then...

But...

you offer a discount on condition that the customer pays within a specified time

the tax value is based on the discounted amount even if the customer does not take up your offer.

if your terms allow the customer to pay by instalments, the tax value is based on the amount the customer actually pays.

 
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