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Whitehill Business Services Ltd >> news >> latest news >> Early settlement discounts - if you're VAT registered you need to read this...

Early settlement discounts - if you're VAT registered you need to read this...

Posted by admin on January 28, 2015

Early settlement discounts - if you are VAT registered and use early settlement discounts, you need to read this...

tax_m.jpgHMRC have published Revenue and Customs Brief 49/14 in respect of suppliers and customers issuing or receiving VAT invoices that offer a prompt payment discount - often called an early settlement discount -  after 1 April 2015.

At present, suppliers offering a prompt payment discount (early settlement discount) are able to account for the VAT on the discounted price, even if the prompt payment discount is not taken up by the customer. Following the change in the rules, suppliers must now account for VAT on the amount actually received. The change took effect from 1 May 2014 for supplies of broadcasting and telecommunication services (where there is no obligation to provide a VAT invoice).  But for other supplies, the change takes effect on 1 April 2015. If suppliers do not wish to issue credit notes, certain information must be included on the invoice, including the terms of the prompt payment discount and a statement that the customer can only recover as input tax the VAT paid to the supplier.