Last year, we issued an article highlighting the changes to the VAT treatment of prompt payment discounts which is due to come into effect from 1 April 2015. The VAT man considered that some businesses were exploiting the PPD rules and tax losses were being suffered by the government in some circumstances. As a result, the rules are now about to change for everyone.
the guidance notes confirm HM Revenue & Customs have now issued further guidance in “Business Brief 49/14”
Suppliers will have two options:
- Issue an invoice for the full amount and then a credit note when a discount is given; or
- The original invoice shows the full value of the transaction and must include the terms of the discount together with a statement that the customer only agrees to recover as much input tax as has been paid to the supplier.
They also suggest that the invoice might set out details of the discounted price, VAT on the discounted price, and the total due if the discount is taken up. Where a payment is made outside the terms of the discount, option two can’t be used and the supplier must issue a credit note.
If you require any further details on how these changes might affect you, please contact Brian Gooch.
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