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VAT Changes to Prompt Payment Discounts


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20th March 2014 The VAT People

HMRC have announced changes to the VAT rules regarding prompt payment discounts.

Over several years many of our clients have taken advantage of the VAT rules relating to prompt payment discounts. Essentially the VAT rules for prompt payment discounts are such that if you offer a prompt payment discount and the customer does not pay promptly (and therefore pays the higher amount) you only need to account for VAT on the discounted amount. This method of discounting can therefore be particularly advantageous if you are supplying goods or services to notoriously slow payers.

HMRC have identified that prompt payment discounts are being increasingly used in situations where customers are unable to recover VAT, particularly the telecommunications and broadcasting arenas. They have identified that where the payments are not made promptly these is a loss to the Revenue (estimated to be 3.5M). Therefore the current VAT rules from prompt payment discounts will be changed so that VAT will always be accounted for on the amount received. These changes come into effect on the following dates:-

- supplies of telecommunication and broadcasting services where there is no obligation to provide a VAT invoice - 1 May 2014

- all other supplies - the measure will have effect for supplies made on and after 1 April 2015

Please refer to the link for further details of the changes.

Business promotions and discounting can be complex from a VAT perspective, please do not hesitate to contact us should you have any questions regarding this change or any other VAT issues relating to business promotions.

About the Author

The VAT People are leading VAT and Customs Duty consultants based in the North West of England. We work with a wide range of businesses throughout the UK as well as assisting our accountancy colleagues to unravel the thorny VAT issues for their clients. We are one of the UK's largest and most comprehensive sources of VAT and Customs advice, our consultancy team having over 140 years of experience in VAT and Customs gained in either HMRC or a Big 4 accountancy practice environment.

Call us on our VAT helpline 0800 077 4604 to discuss. All initial discussions are free with no-obligation.

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Article Published/Sorted/Amended on Scopulus 2014-04-02 09:06:18 in Tax Articles

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